Set up custom pay items

Set up the types of earnings, deductions, leave, superannuation, and reimbursements your organisation plans to use for payroll.

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, bonuses, or commissions.
  • Deductions take payments out of your employees' pay to cover commitments like payroll giving or union fees.
  • Reimbursements are for out-of-pocket or other expenses you reimburse employees for like travel allowances or contractor withholding tax. For example, use a mileage pay item with the rate per unit as $0.73. Each pay run, enter the number of kilometres the employee has driven in their pay template. Xero calculates the mileage and amount to reimburse.
  • Leave pay items record any time off like bereavement or parental leave.
  • Superannuation such as KiwiSaver.
  • Separated payments are pay items used to split out wages and pay them from different cost centres.
  • 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, Regular Earnings.

    Image of the Earnings pay item list.

    • If you're creating an Earnings pay item and it's the employee's main source of earning, select Regular Earnings to see it in their Employment tab.
    • If the Earnings pay item is for redundancy, select Other Gross Earnings to calculate holiday pay in the redundancy payment. Otherwise, select Withholding Income.
  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.

You can now add the pay items to your employees' pay templates (so they're included in each pay run) or adjust an employee's payslip in a draft pay run for a one-time adjustment.