Setting up payroll in Xero might seem daunting, but it can be straightforward and efficient when the initial platform is properly created, followed through with a systematic approach, and supported by a Perth tax accountant. This guide provides a step-by-step process to help Australian businesses streamline their payroll setup using Xero’s intuitive platform.
Overview: Simplifying Payroll with Xero
Xero’s cloud-based payroll system is designed to simplify complex payroll tasks. From tax compliance to superannuation guarantee levy calculations, Xero integrates seamlessly with your accounting operations, reducing administrative burdens and ensuring accuracy.
Key Benefits of Xero Payroll
Xero payroll offers a range of features that make it a preferred choice for Australian businesses:
- Automatic calculations for Pay-As-You-Go Withholding taxes and superannuation contributions.
- Integration with accounting functions for real-time financial reporting including your Business Activity Statement preparation.
- Cloud access, allowing you to manage payroll from anywhere.
- Customisation, including pay schedules and payment methods.
- Time management tools, such as timesheets and leave tracking.
By leveraging these tools, businesses can save time, minimise errors, and enhance compliance.
Step-by-Step Guide to Setting Up Payroll in Xero
1. Configure Payroll Settings
- Navigate to Payroll Settings: Access the payroll section in Xero.
- Set Up Bank Accounts: Link your primary bank account for payroll transactions.
- Define Pay Cycles: Choose payment frequencies (weekly, fortnightly, monthly) and set due dates.
- Establish Superannuation Rules: Add superannuation funds and ensure compliance with legal contribution requirements.
- Customise Timesheet Categories: Align categories with your operational needs for better tracking.
2. Add Employee Details
- Go to the Employees Tab: Click “Add Employee” and input key details like tax file numbers (TFN), superannuation accounts, and banking information.
- Set Tax Rates: Ensure the correct tax scale is applied for each employee based on their residency status.
- Create Pay Templates: Customise pay templates to reflect employees’ wage rates, allowances, and deductions.
3. Run Payroll
- Enter and Approve Timesheets: Record hours worked and approve leave requests.
- Review Payroll Details: Double-check tax, superannuation, and net pay calculations for accuracy.
- Process Payments: Use batch payment features for efficient direct deposits.
- Submit Single Touch Payroll (STP) Reports: Ensure compliance by lodging STP reports with the Australian Tax Office (ATO).
Enhancing Payroll Management with Xero Features
Superannuation Compliance
Update superannuation rules in Xero regularly to reflect legislative changes. Allocate specific funds to employees and automate contribution calculations.
Document Storage
Attach employee contracts, tax declarations, and other essential documents to their Xero profiles. This ensures all relevant information is securely stored and easily accessible.
Detailed Time Tracking
Use Xero’s Timesheet Categories to allocate employee hours to specific projects or tasks. This feature supports accurate billing and cost tracking, particularly for service-based industries.
Maintaining Payroll Accuracy
1. Ongoing Updates
- Update employee profiles with salary changes, tax declarations, and banking details.
- Adjust pay templates for new allowances or deductions.
- Monitor superannuation rates and ensure compliance with annual updates.
2. Regular Reviews
Conduct periodic audits to identify discrepancies and ensure payroll aligns with your financial records.
Simplify Payroll with Xero
Xero provides Australian businesses with the tools they need to manage payroll effectively. By following this guide and leveraging Xero’s features, you’ll ensure your payroll system is accurate, compliant, and efficient.
Take the hassle out of payroll and focus on growing your business.
Why Choose KeyPay Over Xero Payroll?
If you’re a dedicated Xero user, you might ask why you should consider a standalone payroll solution like KeyPay when Xero already includes payroll functionality.
To answer this, here are five compelling reasons why KeyPay might be the better choice for your business payroll needs.
1. Enhanced Employee Self-Service
KeyPay offers a feature-rich employee self-service portal, empowering employees to manage payroll information. This intuitive online portal significantly reduces administrative workload by allowing employees to:
- View and update personal details, bank accounts, and superannuation information.
- Access current and historical payslips, payment summaries, and important documents.
- Submit and monitor leave requests.
- Check leave balances in real-time.
While Xero provides an employee portal, its functionality is limited to viewing information. In contrast, KeyPay enables employees to make updates directly, streamlining processes and eliminating double handling. This advanced self-service capability makes it easier for businesses to reduce time spent on routine payroll queries.
2. Simplified Payroll Tax Management
Payroll tax compliance can be challenging for businesses operating across multiple states or managing larger payrolls. KeyPay simplifies this process by offering:
- Built-in payroll tax reporting, including reporting for Western Australia and the other Australian state payroll tax jurisdictions.
- Employee-level and location-based earnings tracking.
This functionality is particularly beneficial for businesses with interstate employees, as KeyPay makes it seamless to meet payroll tax obligations for a mobile workforce.
3. Advanced Employee Management
In larger organisations, payroll managers often rely on department heads or team leaders to manage leave approvals and timesheets. KeyPay’s Employee Management Portal supports this structure by enabling:
- Creation of custom employee groups for specific departments or locations.
- Assigning access to managers to approve leave requests and timesheets within their groups.
- Unlimited groups and manager access at no extra cost.
This tailored approach allows businesses to align payroll management with their organisational structure, improving efficiency and accountability.
4. Location-Based Reporting for Deeper Insights
KeyPay’s Location Reporting feature allows businesses to assign employees, earnings, and timesheets to specific locations. This functionality provides:
- Granular payroll insights based on location.
- Data-driven staffing decisions informed by location-specific performance metrics.
This reporting capability offers a unique level of visibility for multi-site operations, ensuring payroll decisions are aligned with business needs.
If you employ offshore staff, you will likely need software tailored to that jurisdiction or the Xero/KeyPay version in that country.
5. Flexible Payroll Configurations
KeyPay is designed for adaptability, allowing businesses to configure payroll to suit their unique requirements. Some of its advanced capabilities include:
- Unlimited pay categories for custom wage structures.
- Recurring deductions that automatically expire after a specified date or amount.
- Custom leave categories with pro-rata accruals.
- Flexible payment rates, whether daily, hourly, or annual.
- Multiple pay schedules, including weekly, fortnightly, or monthly options.
This flexibility ensures that KeyPay can accommodate even the most complex payroll structures, making it ideal for businesses with diverse workforce requirements.
Integrating Employment Hero with KeyPay and Xero
Integrating Employment Hero with KeyPay offers Australian businesses a comprehensive solution that unifies human resources (HR) and payroll functions. This integration streamlines administrative tasks, enhances compliance, including BAS compliance, and provides a seamless experience for employers and employees.
1. Seamless HR and Payroll Integration
How It Works:
Employment Hero is a cloud-based HR platform that handles tasks like onboarding, employee management, and benefits administration. When integrated with KeyPay, any updates made in Employment Hero—such as new employee details, tax file numbers, or salary changes—are automatically synced with KeyPay’s payroll system.
Why It Matters:
- Eliminates duplicate data entry: There is no need to transfer information between systems manually.
- Minimises Errors: Reduces the risk of inconsistencies, such as mismatched tax or superannuation details.
- Streamlines Onboarding: Employees who are added to Employment Hero can be processed in payroll.
2. Automated Compliance Management
How It Works:
The integration helps businesses meet regulatory obligations by automating payroll and HR compliance. KeyPay handles payroll tax calculations, Single Touch Payroll (STP) reporting, and superannuation contributions, while Employment Hero manages employee contracts, workplace policies, and awards.
Why It Matters:
- Accurate Payroll Tax: State-based payroll taxes and award rules are handled seamlessly.
- STP Filing Made Easy: KeyPay automatically reports pay runs to the Australian Tax Office (ATO), ensuring compliance.
- Award Interpretation: Employment Hero provides access to modern awards, which integrate with KeyPay for correct pay rates and conditions.
3. Enhanced Employee Self-Service
How It Works:
Through Employment Hero’s employee self-service portal, team members can manage their HR and payroll information in one place. This includes payslips (powered by KeyPay), leave requests, and personal data updates.
Why It Matters:
- Empowers Employees: Employees can view and manage their details without going through HR or payroll staff.
- Streamlines Leave Management: Leave requests submitted in Employment Hero are automatically reflected in KeyPay’s payroll system.
- Centralised Access: Employees have a single portal for both HR and payroll, reducing confusion and increasing efficiency.
4. Comprehensive Reporting and Insights
How It Works:
The integration provides detailed reporting on payroll expenses, HR metrics (like employee turnover), and workforce management. Employment Hero delivers strategic HR insights, while KeyPay provides granular payroll data, such as location-based earnings and superannuation reports.
Why It Matters:
- Data-Driven Decisions: Use payroll and HR analytics to make informed decisions about staffing, budgeting, and benefits programs.
- Auditable Records: Easily track compliance with reporting requirements for payroll, tax, and leave entitlements.
- Customised Reports: Generate reports tailored to specific needs, such as project-based earnings or department-level employee costs.
5. Scalability and Flexibility
How It Works:
The platform grows with your business, accommodating both small teams and large organisations with complex HR and payroll requirements. KeyPay’s flexibility in handling pay conditions, awards, and pay schedules complements Employment Hero’s ability to manage benefits, recruitment, and training.
Why It Matters:
- For Growing Businesses: Add new employees or locations without worrying about exceeding platform limits.
- Handles Complex Needs: Efficiently manages diverse employee groups, varying award conditions, and multi-site operations.
- Cost-Effective: Pay for what you need as your workforce evolves, avoiding unnecessary expenses on unused features.
Who Benefits Most from This Integration?
- Small to Medium Businesses: Streamlined processes save time and reduce compliance burden.
- Multi-State or Multi-Location Companies: Location-based reporting and payroll tax automation simplify interstate compliance.
- Award-Covered Workforces: Pre-configured Employment Hero and KeyPay award conditions ensure accurate payments.
- HR-Focused Organisations: Combines strategic HR tools with robust payroll processing for a unified experience.
Conclusion: A Unified Solution for HR and Payroll
Businesses gain a complete workforce management solution by combining Employment Hero’s powerful HR tools with KeyPay’s advanced payroll capabilities. This integration saves time, reduces administrative overhead, ensures compliance, and provides the flexibility to grow with your business.
Whether scaling up, managing a distributed workforce, or looking to streamline payroll and HR, the Employment Hero-KeyPay partnership is designed to help you work smarter, not harder.
At Westcourt, we are independent. Our approach to advice only, rather than promoting a singular platform, gives a growing family business in Perth the options needed to manage payroll – from larger complex systems to a small team of less than five. As we are solely committed to tax advisory for families in business, coupled with our award-winning technical expertise, global network and small firm service ethic – we are a natural choice for when you are looking at streamlining your payroll – so why not give us a call?
