Xero: Running a pay run

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Xero offers a payroll service for a monthly fee. This will allow you to run your payroll yourself. It is advised that if you ever have any queries about what to do in certain circumstances (e.g. annual leave, sick leave, parental leave) that you consult an expert if you are unable to find the information out through your own learning.

This guide will talk you through running a payment run for your staff. To start the pay run, you will need to select Payroll from the top bar and then Pay Employees. You will get to the below screen and you will need to select the payrun date and then Process Pay Run. HMRC’s months run from the 6th of one month until the 5th of the next, so you may see a date that is unfamiliar to you. For example, if you pay your staff on the 28th of each month then you may see the 5th of May for the payrun on 28th of April.

You will then get a list of employees and the amounts they will be getting paid for the month. If they are on a monthly salary or regular weekly hours, then this may have been autopopulated. You will obviously want to check that the data is correct.

If you need to amend anything, you can click into the staff member and then amend their earnings, add in the number of hours worked, add a bonus or anything else that is required.

When you are happy with this, you can click the post button at the bottom of the screen which will then post all of the required information into Xero including creating something to reconcile the payments against when they hit your bank account. It will also post the pay run directly to HMRC, provided your login credentials are correctly entered into Xero. You can check that it has been posted correctly from Payroll > RTI filings and you should see the status Accepted next to the pay run.

You will note from the previous screen that you have amounts at the top of the screen for Gross Earnings, Employer NIC, Employer Pensions, Reimbursements and Total Cost as you can see below.

It is important to note that whilst you may be paying your employee £1,000, they will not be receiving all of that and you will need to deduct some amounts (for example for student loans, tax and national insurance) before transferring the money to them. The amount you actually need to transfer can be seen on their payslips under Net Pay. You will also have to pay employer’s NIC (National Insurance Contributions). Both the deductions from staff’s pay and the employer’s NIC can be paid by logging into your government gateway account.

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