Benefits and deductions

Add benefits and deductions to an employee using pay items in Xero. This way, we'll calculate how much to pay them and the correct taxes to withhold from payroll.

How it works

You add benefits and deductions to each employee by adding pay items to their pay. If you have employees with benefits or deductions, you can claim those pay items for your business if they're tax deductible. This can be anything from health plans to retirement plans.

Make sure to check the IRS website for Small Business Employee Benefits or talk to your accountant for more information on setting up pay items.

Commonly added benefits and deductions

  • Health, dental and vision insurance
  • Life insurance
  • Employer and employee 401(k) contribution
  • Garnishment
  • Disability insurance