Xero Payroll Settings – Pay Items Tab Overview

by | Apr 17, 2018

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Before paying your employees through Xero payroll, you need to fully set it up. This article provides an overview of the items you need to set up on the Pay Items tab in the payroll settings area.

Pay Template Overview

Before we go to the Pay Items tab in the payroll setting area, let’s find out what pay items are. In a nutshell, pay items allow you to make payroll payments to and deductions from your employees. To make this work, you need to add pay items to each employee’s Pay Template when you set them up in Xero.

To see what I mean, let’s have a look at the pay template for demo company employee Lebron James:

  1. Go to Payroll → Employees in the main menu.
  2. Click on the Lebron James tab.

Now click on the Pay Template tab. Here we can see the pay items assigned to Lebron:

  • Earnings Rate: pay item Ordinary Hours has been assigned.
  • Deduction Type: pay item Union Fees/Subscriptions has been assigned.
  • Superannuation Fund: pay item HESTA Super Fund – SGC – SPIN has been assigned for the superannuation guarantee scheme.
  • Superannuation Fund: pay item HESTA Super Fund – Salary Sacrifice – SPIN has been assigned for some voluntary superannuation contributions.


If you need to add new pay items to Lebron’s template or delete any existing items, this is the place to do it. The pay items on his template will be used to calculate his remuneration whenever payroll is processed.

Pay Items Tab in Xero’s Payroll Settings

Now that we know what pay items are, let’s take a look at the place in Xero where you can set them up, edit them or delete them. To get there, click on the Pay Items tab in the payroll settings area:

  1. Go to Settings → Payroll in the main menu.
  2. Click on the Pay Items tab.

Here you will see a screen that shows all the pay items already set up in Xero’s demo company. From here you can perform the following tasks:

  • Add new pay items.
  • Edit existing pay items.
  • Mark as Inactive existing pay items.
  • Delete existing pay items.

The types of pay items you can add, edit, mark as inactive or delete are:

  • Earnings
  • Deductions
  • Reimbursements
  • Leave


Mark Cunningham

Mark Cunningham

Xero Specialist | Udemy Instructor | Small Business Owner

I have been a company accountant for more than 20 years. I am now dedicated to empowering small business owners through my highly-rated and popular Udemy courses on Xero, bookkeeping and accounting.

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