Xero Payroll review – features, strengths & weaknesses compared

Updated on 7 August 2023

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Based in Wellington, New Zealand, Xero is full-service accounting software that offers a wide array of bookkeeping services. Operational since 2006, Xero is building quite a global reputation, to the point that it’s now officially recognised by HMRC.

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Who is Xero for?

Xero is the perfect solution for a small business that seeks help balancing their accounting and payroll needs in one package. If you sign up for a Xero package, you’ll have access to all manner of projections and reports that surround your business spending and profit and loss. 

What’s more, you can use Xero to pay any outgoing bills, manage expenses and all other manner of tasks. Essentially, you’ll be bringing in the services of a dedicated accountant – without the need to hire a payroll manager and all that entails.

Image credit: Xero.com

In this regard, the payroll element of Xero should be considered a bonus, not necessarily a selling point. Xero promises to simplify everyday tasks for an SME, and when it comes to keeping a lid on bookkeeping, it does precisely that.

In addition, there are no upper or lower limits on how many people need to be included on payroll with Xero. The price points begin at under five employees and rise from there. As payroll is considered an add-on service, you’ll enjoy plenty of flexibility on how much you end up spending.

Who is Xero not suitable for?

If you’re looking for purely payroll software, having your accountancy needs under control thanks to an employee or other software package, there is little point in investing in Xero. Most of what this software offers, and lest we forget charges you for, will be considered redundant.

Other than businesses that are only looking for help with payroll, Xero should only really be used by companies with a tech-savvy employee base. One of the significant advantages of the HR features found within Xero is the ability to use the app

One team member could request a holiday at the touch of a button, at any time, from the Xero app on their personal smartphone. That could be in the office or at home on impulse following a conversation with their spouse. A line manager can also approve this holiday request with equally little fuss. 

Suppose your team are not comfortable with such machinations, though. In that case, confusion can quickly reign. All it takes is one employee refusing to install a company-centric app on their personal appliance to bring down the whole idea.

On a similar note, it should also be noted that Xero has minimal customer support over the telephone. Queries and issues will invariably be managed online, presumably due to the time difference between hemispheres. Again, this could cause a problem for users that lack comfort and familiarity with technology.

How much does Xero cost?

Xero is billed for its accountancy services over three tiers. As an SME, you’ll likely need the Premium service, charged at £33 PCM. That sounds like a lot, but you’d need to pay a lot more for a professional accountant!

Naturally, though, you’ll need to pay a little more for payroll services. This is charged at £5 per month for your first 5 employees, then an additional £1 per hour head for each employee on your payroll. Overall, an SME with a Premium accountancy package looking to run payroll for 12 employees will pay £49 to Xero each month (potentially more, depending on additional accounting needs.) 

It’s a matter of personal choice to a business owner if this is considered a cost worth swallowing – though it should be noted that the additional funds directed toward payroll also accommodate a range of HR software needs.

Overview of Xero

As pointed out, Xero shines as a slice of accountancy software. That’s how it should be considered, with the fact that it can also handle payroll needs – recognised by HMRC, lest we forget – regarded as a welcome bonus worthy of a small additional payment.

If you decide to make use of Xero, you’ll need some degree of tech knowledge – as will your team. Support can be a little thin on the ground from Xero HQ, and the software’s learning curve is pretty steep. This is no small part due to a slightly clumsy user interface. 

Ultimately, though, Xero knows who it is marketing itself to. This software is created with full-service users in mind. As payroll software, it’s overpriced and underpowered. As an accountancy app that can also handle your payroll as a small business, it’s compelling.

Strengths of Xero

The biggest strength of Xero is the sheer number of tasks that it can handle alongside payroll. As a full-service HR and accountancy package, it’s hard to beat. The addition of payroll services at a very reasonable rate simply add to the appeal.

Weaknesses of Xero

For every positive of Xero, there are also some essential warnings to consider. Never lose sight of the fact that Xero is very overpriced if you only need payroll software – that’s not really what this software was created for. 

In addition, the learning curve for Xero can be pretty strenuous, and the set-up may take a while. Any frustration caused by this will be magnified by the lack of telephone support in the event of a problem. If you question your compatibility with modern technology, consider a trial before committing to Xero.

How does Xero compare with other options on the market?

In many respects, Xero stands apart from other payroll software due to its functionality as a full-service accountancy service. If you’re looking for pure payroll assistance, Xero compares poorly – payroll is an additional service for Xero, and there are other, more tailored alternatives out there.

There is a lot to love about Xero as an electronic bookkeeper, though. If you have a tech-savvy team that are willing to embrace the use of the Xero app for their HR needs and will make use of the many and varied features found within. In this case, it’s a worthy investment – especially given that Xero operates at a competitive price point within the industry.  

Verdict on Xero

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Xero is a welcome addition to the payroll SaaS landscape, purely because it offers something different to so many competitors. If you’re a tech-savvy owner of an SME that wishes you could outsource all your accounting needs, it could be an absolute godsend. Just ensure that if you decide to take out a Xero subscription, you’re getting value for money from all the services it provides.

Reviewed by , Managing Director

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