Pay items

Use pay items to set up the earnings, benefits, deductions, reimbursements, and time off you use for payroll. You can then add recurring pay items to an employee's pay. For example, if your organization 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.

Pay item types

  • Pay items help customize and track the way you pay each employee. You can add the following kinds of pay items:
  • Earnings are pay rates that cover all earnings including supplemental earnings like commissions and bonuses.
  • Benefits cover employer contributions made in addition to the employee's pay like health insurance and employer 401(k) contributions.
  • Deductions are amounts taken out of, or withheld from an employee's pay like the employee's portion of health insurance or 401(k) contribution.
  • Reimbursements are for out-of-pocket or other expenses you reimburse employees for like gas or office supplies.
  • Time off pay items record any time off, paid or unpaid.
  • 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. From the Pay Items tab, click the pay item you want to add. For example, Benefits or Deductions.

    Image of adding a Pay Item.

  4. From Add select the pay item type you want.

    If you add a pay item for earnings that are your employee's main source of income, select Regular Earnings so you can use it when you add their salary and wage details.

    If you add a pay item for a time off entitlement, you'll also need to assign the time off type to the relevant employees. You may also need to add a balance for the time off.

  5. Name the pay item and complete the other details:
    • You’ll need to add an expense or liability account, or both, for some pay items.
    • If you assign expense and liability for time off pay items, we'll create journal entries for the time off in the general ledger.
    • You can choose to show a balance on your employee pay slips for some pay items.
  6. Click Add.

You can now add the pay items to your employees' pay templates or adjust an employee's pay stub in a draft pay run.