An Overview of Xero Payroll Pricing

Xero Payroll is available from £33 per month for one employee on its Grow plan, and costs up to £59 per month for 10 employees (plus £1 for each additional employee) on its Ultimate plan.

Primarily an accounting software provider, Xero bundles its cloud-based payroll solution with its accounting packages (except on its £16 per month Ignite plan), making it an affordable two-in-one solution for small-businesses.

However, since Xero Payroll is only available as part of Xero’s accounting packages, it’s not a good solution for businesses looking for a standalone payroll software. Additionally, larger enterprises with more complex needs may find alternative solutions more suitable.

How Much Does Xero Payroll Cost?

Here’s a quick breakdown of how much Xero Payroll costs:

Payroll features are the same on each plan; the only feature that changes is the number of employees you can process payroll for:

• Grow (£33/month): this plan only allows payroll processing for one person, making it a good solution for business owners with an assistant.
• Comprehensive (£47/month): this plan allows payroll processing for up to five people, and is a viable option for startups with a small team.
• Ultimate (from £59/month): this plan can be used to process payroll for up to 200 people, although doing so will increase the cost to £149 per month. It’s a viable solution for fully fledged small businesses.

Although Xero’s Ultimate plan can process payroll for up to 200 employees, we recommend switching to a different payroll provider once your business exceeds 50 employees. That’s because Xero’s payroll system isn’t purpose-built to handle large numbers of employees. By Xero’s own account, it’s designed for entrepreneurs and startups.

If you have more than 50 employees, we recommend switching to providers such as Moorepay or ADP, who provide both payroll software and outsourced payroll services. They also offer HR solutions, which is an essential tool for growing businesses. You can find out more about them in our guide to the best payroll solutions for small businesses.

What’s Included in Xero Payroll?

Here are the main features included in Xero Payroll:

HMRC Compliance

Xero Payroll is HMRC recognised for Real Time Information (RTI) online filing. This means it automatically calculates and submits your payroll information to HMRC, ensuring you stay compliant with UK regulations. It handles tax, National Insurance contributions (NIC), student loan deductions and pension calculations, so you don’t have to worry about manual calculations or errors.

HMRC recognition is a must-have feature of any payroll software provider, and you shouldn’t use one that isn’t recognised.

Statutory Pay Calculations

Xero Payroll automatically calculates statutory pay, including Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP) and Statutory Shared Parental Pay (ShPP). It also handles Statutory Sick Pay (SSP) calculations and reporting. This ensures your employees receive the correct pay and deductions, and helps you avoid penalties for non-compliance.

This is an incredibly useful feature that most free payroll software providers don’t have, even though they’re designed to process payroll for the same number of employees (generally up to 10). This demonstrates that, even if you have a very small team, it’s generally worth it to pay for a payroll software solution, so you don’t have to waste time with spreadsheets and calculators, which can often lead to mistakes.

Pensions Auto-Enrolment

Xero Payroll supports pensions auto-enrolment, making it easy to comply with UK pension regulations. It assesses your employees’ eligibility, enrols them in a pension scheme and calculates the necessary contributions. You can also manage opt-ins, opt-outs and contribution changes directly in Xero Payroll.

Employers, by law, must enrol all eligible employees into a pension scheme, so almost all paid payroll software will have some form of pension auto-enrolment. You can find out more about workplace pensions rules and regulations in our guide.

Customisable Payslips

You can customise your payslip templates in Xero Payroll to reflect your brand and include the information your employees need. Payslips can be emailed directly to employees or accessed through the Xero Me portal. This eliminates the need for printing and distributing physical payslips, saving you time and money.

Employee Self-Service

Xero Payroll includes an employee self-service portal called Xero Me. Employees can access their payslips, submit timesheets, request leave and update their personal information online or through the mobile app. This reduces the administrative burden on your HR and payroll teams and empowers employees to manage their own information.

All the best payroll software providers designed for larger businesses than Xero Payroll include a self-serve tool, but some, such as OneAdvanced Payroll, don’t include a mobile app. So, the fact that Xero includes one, even for businesses processing payroll for just one employee, is quite impressive.

Flexible Pay Schedules

Whether you pay your employees weekly, fortnightly or monthly, Xero Payroll can accommodate your pay schedule. You can set up multiple pay schedules for different groups of employees, such as salaried staff and hourly workers. This flexibility allows you to tailor your payroll to your business needs and ensures everyone gets paid on time.

For help on how to choose the right payroll schedule, go to our guide.

Payroll Reporting

Xero Payroll generates all the necessary payroll reports, including P60s P45s. You can also create custom reports to analyse your payroll data and gain insights into your labour costs. Reports can be exported to PDF or Excel for further analysis or record-keeping.

The ability to build custom reports is an advanced feature, usually only offered by payroll giants like Moorepay and Advanced. Although, since Xero is primarily an accounting software provider, it’s not too surprising that it also offers excellent reporting features as part of its payroll tools.

Integration with Xero Accounting

Since Xero Payroll is just one feature of Xero’s accounting software packages, it seamlessly integrates with your financial data. Payroll information flows directly into your general ledger, eliminating the need for manual data entry, therefore reducing the risk of errors. This integration provides a complete picture of your financial position and streamlines your accounting processes.

Xero isn’t the only provider to offer integrated accounting and payroll software – Quickbooks and Sage both do as well. Most dedicated payroll software also integrates with popular accounting tools, including Xero. We think Sage and Quickbooks are slightly better options than Xero for integrated accounting and payroll. Sage, because it offers a larger suite of people management tools, such as HR, and QuickBooks because it offers accounting tools that can handle larger businesses.

However, Xero remains an easy-to-use and affordable solution for small businesses.

Is Xero Payroll Worth the Money?

Xero Payroll is worth the money for very small businesses with up to 50 employees looking to streamline their accounting and payroll.

That’s because Xero’s main selling point is the fact that it offers integrated payroll and accounting tools, meaning you don’t need to pay extra for payroll. This makes it an attractive choice for small businesses and startups.

Xero Payroll’s features are also comprehensive enough to meet the needs of most small businesses, with the provider offering an automated service that complies with HMRC requirements. It even offers more premium features, including an employee self-service mobile app and customised reporting – even some dedicated payroll software providers don’t offer this.

However, Xero Payroll isn’t a very scalable solution and won’t suit businesses with more than 50 employees, even if the platform can technically accommodate up to 200. That’s because the platform isn’t really designed to handle a lot of employees, and payroll processing will take longer the more employees you add to the platform.

After a certain point, you’ll likely need to switch to one of the payroll platforms we outline below. But, if you want to keep using Xero for accounting, don’t worry. It integrates with a lot of third-party payroll software platforms.

Xero Payroll Alternatives

If you’re a very small business or startup that needs accounting tools and has straightforward payroll requirements, Xero is hard to beat in terms of value and ease of use.

However, if you have more complex needs, prefer a standalone solution or want to outsource your payroll, one of these top cloud-based payroll software solutions may be a better fit:

• Iris Staffology: Iris Staffology is a comprehensive and user-friendly cloud-based payroll solution. It can process payroll for up to 5,000 employees, and offers an HR solution alongside core payroll features, such as automatic tax calculations, customisable payslips and employee self-service. Plus, it integrates with Xero Accounting.
• ADP: ADP is a well-established global payroll provider that offers a range of solutions for businesses of all sizes. Compared to Xero Payroll, ADP provides more advanced features, such as HR integration, workforce analytics and global payroll support. However, ADP’s pricing is generally higher and less transparent than Xero Payroll’s, making it more suited to medium-sized businesses or larger.
• MHR: MHR’s iTrent payroll software is known for its powerful reporting capabilities, and can handle a large number of employees. It allows you to generate custom reports and gain deep insights into your payroll data. It also offers features such as employee self-service and automatic tax calculations. However, unlike Xero Payroll, MHR doesn’t offer an iOS or Android app for employees to use.
• Frontier: Frontier Software’s payroll solution is well suited to businesses with international payroll needs, as it supports multiple currencies and country-specific tax regulations.
  
• Advanced: Advanced’s payroll software offers comprehensive features and strong customer support, including live training sessions and a dedicated helpdesk. It handles automatic tax calculations and pension auto-enrollment, and integrates with a number of third-party HR and accounting software. However, Advanced doesn’t have the convenient mobile apps for employees that Xero Payroll does.
• Moorepay: If you want to completely outsource your payroll, Moorepay’s managed payroll service is a strong contender. The company handles everything from processing pay to dealing with HMRC, which can save you significant time and stress. This level of service does come at a higher cost than DIY solutions like Xero Payroll, so it’s best suited to businesses with more than 100 employees.