Add a custom pay item

Use pay items to set up the earnings, deductions, reimbursements, and leave you use for payroll. You can then add recurring pay items to an employee's pay. For example, if your organisation has a social club, set up a deduction so you can add it to your employees pay run. Or you could adjust their pay for a single pay period for a one-time-only pay item like a bonus or commission.

How it works

  • Pay items help customise and track the way you pay each employee. You can add the following kinds of pay items:
  • Earnings are pay rates like wages, tips, bonuses, or commissions. Xero provides ordinary time and other standard rates by default. If an earnings rate is locked, you can still make changes to its Account, Type of units, Rate per unit, or Exemption options. You can't change the type or rate type once the pay item is used. You'll need to create a new earnings rate instead.

    If you want the earnings rate added to the reportable amount at W1 in your activity statements and activity reports, select Reportable as W1 on Activity Statement.

  • Benefits cover employer contributions made in addition to the employee's pay like employer pension contributions or health insurance.
  • Benefits cover employer contributions made in addition to the employee's pay like employer pension contributions or health insurance.
  • Deductions take payments out of your employees' pay to cover commitments like social club payments, salary sacrifice, retirement contributions or student loans.

    If you want the deduction to reduce the reportable amount at W1 on your activity statements and activity reports, select Excluded from W1 on Activity Statement.

  • Reimbursements are for out-of-pocket or other expenses you reimburse employees for like mileage expenses or travel allowances.
  • Leave pay items record special leave types like sick leave, holiday, and statutory time off.
  • Assign recurring pay items (like deductions) to employees every pay run or add pay items to adjust their pay for a single pay period.
  • Choose from default pay items loaded by Xero or add your own custom pay items, making sure you assign the account it records to in the general ledger.

Add a pay item

  1. In the Settings menu, select General Settings.
  2. Under Features, click Payroll Settings.
  3. Click the Pay Items tab.
  4. Under Add, select the pay item type you want. For example, Ordinary Time Earnings.

    Image of the Earnings pay item list.

  5. Name the pay item and complete the other details as needed.
  6. Click Add.
  7. Repeat these steps for each custom pay item your organisation uses.

After setting up your organisation's pay items, you can make a one-time adjustment when you like or add them to your employees' pay templates so they're included in each pay run.