Xero is one of the most widely used cloud accounting platforms in the world, and many businesses choose it to manage their financials, bookkeeping, invoicing, and taxes. In addition to its core accounting features, Xero historically offered payroll functionality—called Xero Payroll or Xero Pay Run—as part of its suite or through integrations. But payroll within Xero has a complex history, varied regional availability, and a mix of praise and criticism from users.
This review dives into the nuts and bolts of Xero Payroll, what users actually experience, and practical considerations for businesses of all sizes.
What Is Xero Payroll?
At its core, Xero Payroll was built to help small and medium-sized businesses process employee pay, handle basic tax reporting, and align payroll with accounting records automatically.
For many years, Xero’s payroll engine allowed users to:
- enter employee payroll data,
- calculate salaries and wages,
- deduct taxes and benefits,
- produce payslips, and
- sync pay run data directly with the accounting ledger.
In some countries like Australia, New Zealand, and the UK, this payroll capability was built in to Xero and integrated natively. In other regions, particularly the US and many parts of Asia and Africa, Xero relied on third-party payroll partners—like Gusto—to fill in the gaps.
In 2025, however, Xero took a significant step with its payroll product, transitioning its global Pay Run feature into read-only mode, with plans to retire it entirely by April 2026. This announcement has shifted how many users approach payroll in Xero moving forward.
Core Strengths of Xero Payroll
1. Seamless Accounting Integration
One of the biggest advantages of using payroll through Xero is that payroll entries tie directly into your accounting system. When a pay run is completed, the appropriate wage expenses, tax liabilities, and cash movements are automatically recorded in the general ledger without manual data entry. This saves time and reduces mistakes, especially for businesses that already use Xero for bookkeeping.
Many users find this integration elegant because it eliminates the need to export files between systems or match up journal entries manually.
2. Basic Payroll Handling is Straightforward
For small businesses with straightforward payroll needs—fixed salaries, minimal deductions, simple tax situations—Xero Payroll handles the essentials with ease. You can set up employee pay items, pay schedules, and quickly run payroll without navigating extremely complex menus.
Users often describe the experience as intuitive compared with legacy desktop software or spreadsheets.
3. Automation and Syncing with Add-Ons
Even in regions where Xero’s native payroll was limited, the platform allowed smooth integration with payroll add-ons such as Gusto. Those integrations brought real payroll processing and tax filings into the Xero environment so the accounting side stayed in sync automatically.
This approach meant businesses could pick payroll software that fit their local rules while still keeping everything tied into Xero’s core accounting engine.
4. Cloud Accessibility
Like the rest of Xero, payroll functions were accessible via the cloud—meaning business owners, accountants, and payroll admins could log in from anywhere at any time. For companies with remote teams or distributed accounting functions, this was a strong advantage over desktop-only systems.
Common Weaknesses and Real-World Complaints
Despite its strengths, Xero Payroll has several consistent drawbacks that many users and reviewers point out.
1. Payroll Was Not Global or Fully Native Everywhere
One of the biggest complaints is that payroll features were region-specific. In many countries outside Australia, New Zealand, and the UK, flexible payroll processing was not built into Xero itself and instead depended on external apps like Gusto or other partners.
This fragmented experience means payroll features and compliance support vary greatly from country to country and often require additional subscriptions.
2. Limited Advanced Payroll Features
Even where payroll was native, it lacked many features that larger businesses or HR professionals expect:
- comprehensive time tracking tied directly to payroll,
- advanced leave and benefits management,
- robust compliance automation beyond basic tax deductions,
- direct deposit in all regions, and
- full employee self-service portals.
Users reported needing external add-ons or manual workarounds for things like time tracking or complex deductions.
3. Discontinuation of Pay Run
As of 2025, Xero’s Global Pay Run capability has been deprecated and set to retire in April 2026. This change means users who relied on Payroll within Xero must transition to alternative solutions, export data, and migrate to new systems before functionality is removed. This disruption has created significant concern and extra work for businesses that weren’t prepared for the shift.
Some users on community forums described the transition period as stressful or confusing, especially when their payroll processes were deeply entangled with Xero’s accounting workflows.
4. Learning Curve for Complex Payroll Needs
While basic payroll processing is simple, many users found that complex payroll situations—such as multi-state tax rules, variable pay schedules, or large employee counts—require more manual effort, third-party integrations, or additional learning. That can be frustrating for businesses that expected smooth, out-of-the-box functionality.
5. Costs Can Add Up
Even though Xero’s core subscription pricing might seem reasonable, payroll often adds extra costs—either through premium add-ons, third-party payroll tools, or higher tier plans that include payroll features. For small businesses on a tight budget, this can make Xero less cost-effective compared with more inclusive competitors.
User Feedback: What Payroll Users Are Actually Saying
Positive User Feedback
- Many users praise how payroll entries sync directly with accounting records, saving reconciliation time and reducing manual entry errors.
- Small business owners report that simple payroll runs are easy to set up and manage once basic employee and tax settings are configured.
- Integrations with tools like Gusto are appreciated for bringing real payroll capabilities into the Xero ecosystem while keeping bookkeeping aligned.
Common Criticisms from Real Users
- Multiple users on forums have complained that payroll setup and operation can be clunky or confusing, especially when state or local tax regulations get complicated. Capterra
- Community feedback highlights the discontinuation of Xero Pay Run as a major pain point for those who relied on it.
- A decent share of users report that customer support responses regarding payroll issues can be slow or require independent research to solve problems.
How Xero Payroll Compares to Alternatives
In payroll reviews across multiple software comparison sites, users often benchmark Xero against alternatives like QuickBooks Online Payroll, ADP, or specialized HR/payroll tools.
Here’s how Xero stacks up:
Vs. QuickBooks Online Payroll
- QuickBooks integrates payroll tightly in the U.S. with features like automated tax filing and direct deposit included in core payroll tiers.
- Xero often requires third-party tools for similar capabilities, depending on region.
Vs. Standalone Payroll Tools
- Standalone systems such as ADP, Gusto, or local payroll software often offer more robust compliance support, benefits management, and employee self-service portals.
- Xero’s payroll strength lies in its accounting integration—not necessarily in deep payroll features.
Who Should Use Xero Payroll (and Who Should Think Twice)
Best Fit
Small businesses with straightforward payroll needs
If your payroll involves a small number of employees, simple tax setups, and you want your payroll expenses recorded automatically in accounting records, Xero Payroll or an integrated partner can be effective.
Businesses already using Xero accounting
Keeping accounting and payroll data in the same ecosystem reduces manual work. This is especially useful for small companies without dedicated HR teams.
Think Twice If
You have complex payroll needs
If your business has multi-state/local tax requirements, benefits administration, union rules, or complex pay structures, you’ll likely need a full payroll/HR system.
You rely on the old Xero Pay Run feature
With its retirement, you will need a new solution by 2026.
You operate outside regions supported directly by Xero Payroll
You’ll need to rely on third-party payroll partners, which increases costs and complexity.
Final Thoughts: Honest Verdict
Xero Payroll has real strengths—especially in how it bridges payroll with accounting and its straightforward design for simple payroll runs. Many small business owners have found it an efficient tool for managing pay runs without juggling multiple disconnected systems.
However, the retirement of core payroll functionality worldwide, the need for additional third-party tools, the variability in features by region, and limitations around advanced payroll needs mean that Xero Payroll is no longer a one-size-fits-all solution.
For many businesses today, the ideal setup is Xero accounting + a dedicated modern payroll provider that integrates tightly and handles local compliance and advanced payroll features. That combo gives you the best of both worlds: clean accounting automation and powerful payroll processing.
If you’d like, I can also help you compare specific payroll providers that integrate with Xero (like Gusto, ADP, PayrollPanda, etc.) and highlight which might suit your country or business size best.