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Integrate with Xero accounting on Payroll classic

Updated

Available for the following plans: Employment Lite, Employment Plus
Available for the following Payroll plans: Standard, Premium, Core Payroll, Unlimited+Payroll

Glossary

What is a Journal feature?

A journal service is a feature that allows you to connect your accounting software with your payroll platform so that you can capture journal entries in your chart of accounts. If you use Xero for your accounting software and journal service, and Employment Hero for your payroll, you can simply connect Xero with your Employment Hero Payroll platform via the Journal Service integration feature.

What happens after I connect to Xero?

After connecting your Xero and EH Payroll platforms together, and setting up your chart of accounts, you can post payroll journals automatically into Xero upon finalising a Pay Run, cutting the need for manual data import/exports or CSV uploads. You will also notice that with this export feature we format the data to reflect automatically your Xero reporting layouts.

Connecting to Xero

The below premise will walk you through how you can connect your Xero accounting platform with your Employment Hero Payroll platform.

Connect to your Xero platform
  1. Log in to your payroll platform.
  2. Click the   Business Settings menu.
  3. Click the Payroll Settings submenu.
  4. Click the   Integrations button.
  5. Locate the Xero logo and click the Add button.
    Xero_1.jpg 
  6. Click the Connect to Xero button.
    Xero_2.jpg 
  7. Click the Allow Access button.
    Xero_3.jpg 
  8. Complete the following fields:
    • Export pay run as:
      • Accounts payable invoice.
      • Journal.
    • Post a draft.
  9. Click the Save button.
    Xero_4.jpg 

Importing chart of accounts

You can import your Xero chart of accounts and then map them to the various transaction types on the chart of accounts page. You can import your chart of accounts by following these steps. Once you have imported your accounts, you can map them to GL transaction types. You will also notice an Export button in the Chart of Accounts. This allows you to export the chart of accounts setup so that you can better see what you​ have mapped.

Setup Chart of Accounts
  1. Click the Business menu.
  2. Click the Payroll Settings sub-menu.
  3. Click the Chart of Accounts button.
  4. Click the Manage Accounts button.
  5. Click the Import button.
  6. Once on the import accounts page, you will see a list of all the accounts in your cloud accounting service chart of accounts. Tick each account that you​ would like to map to a payroll transaction type
  7. Once you​ have selected all your accounts, click the Save button.
    CHART 1.jpg 

Configuring your chart of accounts

Once you have imported your accounts, you can map them to GL transaction types. When you map your default GL accounts, you​ will notice that there is an option to Split by location. This allows you to write a transaction line per location to the journal for the same account. This is particularly useful if you are using locations, classes, or tracking categories within Xero.

If you are using a nominal account from your chart of accounts which has a default tax option other than No GST, then this is that tax that will be applied to all expenses if that nominal account is mapped to the Employee Expense Account. The Xero API does not allow us to write transactions to a bank account. As such, you have two options:

  1. You can post your payroll info to Xero as a purchase invoice, much like the inbuilt Xero Payroll does now. When you do this, the purchase invoice is reconciled against the bank account transaction and as such, does not need a transaction line written to the bank account
  2. You can post to Xero using a journal. If you do this, you’ll need to create a payroll clearing account that we can post to which you can then use to reconcile against the bank account.

What if I have multiple entities?

If your business has ‌multiple employing entities, you can only link one employing entity to your Xero accounting platform. You will need to set up the remaining employing entities as a manual file upload to sync this data to your Xero accounting platform.

Importing my Xero employees

You can use the Employee Importing feature within the Payroll Settings module to import the employee data stored within your Xero platform. Using the Xero Payroll import feature will import the following data:

  • Employee details.
  • Leave Categories.
  • Pay Categories.

However, it is essential to note that the import process may not always yield accurate and complete data due to varying Xero settings. Therefore, you must verify the imported information thoroughly. Pay particular attention to the following points:

  • Opening Balances are not included in this import and will need to be manually entered.
  • Employee leave allowances and accrual rates should be checked for accuracy.
  • Tax file numbers (TFNs) may have to be added manually for imported employees.

Warning

When using any Xero integration features in your Payroll classic platform, you need to have at least Standard + Payroll admin access on your Xero platform.

Important

If you have used an external Id before, you cannot save ‌this data point if you have enabled the Unique External Id setting. You can read further information on this setting in the following article. The Payroll classic platform does not import leave balances when setting up new employees.

Importing my Xero employees
    1. Log into your Employment Hero Payroll classic platform.
    2. Click the  Business Settings menu.
    3. Click the Payroll Settings submenu.
    4. Click the Import Employees button.
    5. Select the Xero option in the Import Employees From drop-down.
    6. Under Do Not Import, tick the items that you do not want to import into Employment Hero Payroll:
      • Pay categories
      • Deduction categories
      • Leave categories
      • Pay schedules

Important

By default, the above items will be ticked, which means that these will not import into Employment Hero Payroll.

  1. Click the Import button.
    Xero_1.jpg 
  2. Enter your Xero login information and click the Log In button.
    Xero_2.jpg 
  3. Enter your 2 Factor Authentication code and click the Confirm button.
    Xero_3.jpg 
  4. Click the Allow Access button.
    Xero_4.jpg 

  5. Click the Import button.
    Xero_5.jpg

     

    Helpful Hint

    You will now see on your screen a status message showing the successful uploading of your Xero employee data into your Payroll classic platform.

    Xero_6.jpg 

Potential discrepancies when importing employees

One critical aspect to be mindful of when importing employees from Xero is the potential discrepancies in Leave and Pay Categories. Any categories imported from Xero will be 'Blank' and so might not align with Employment Hero's compliance standards, particularly concerning the STP Phase 2 regulations.

To avoid issues such as incorrect data being sent to the tax office, we strongly recommend taking the following steps:

  1. Assign Employment Hero Native Pay Categories and Leave Accruals: Before proceeding, assign the appropriate Employment Hero native categories to employees.
  2. Delete Imported Categories from Xero: After assigning the correct categories, delete any categories that were imported from Xero to prevent them from being mistakenly used. Categories Imported from Xero will include a long External ID.

Failing to follow these steps could result in issues with tax reporting and employee payment processing. For instance, pay categories imported from Xero might be blank from a tax reporting perspective, defaulting to wages.

Important

It is important to know that when importing from Xero there will be some items which need review:

  • Superfund ABN will not be imported, will require manual updates in the platform.
  • Deductions higher than $100 will reflect as a maximum of $100 and will require manual updates in the platform.
  • All leave categories, pay categories, deduction categories and pay schedules are imported. If these are going to change, or you no longer require, these manual deletion from the platform will be necessary.
  • Recurring allowances will not be imported and will require manual updates in the platform.
  • All deductions that are set up as a percentage will be imported as a fixed amount and will require manual updates in the platform.
  • Cost Centres/locations will not be imported and will require manual updates in the platform.
  • Currently there is no way to filter what information you would like to bring across to EH(for example:. terminated employees will be imported) therefore there may be the need for manual updates in the platform.
  • Not all employee data will be imported (e.g. tax file number (TFN)). This will require manual updates in the platform.
  • Most Xero platforms use the pay category Ordinary Hours which when imported will NOT accrue leave. We recommend changing the Primary Pay Category to Permanent Ordinary Hours, Casual Ordinary Hours or Salary to align with our systems.

Exporting Pay Run data

You can use the Export to Xero feature to transfer the finalised Pay Run data over to your Xero accounting platform.

Export a finalised Pay Run into Xero
  1. Log into your Employment Hero Payroll classic platform.
  2. Click the   Pay Run menu.
  3. Click the finalised Pay Run that needs exporting to Xero.
    Screenshot of pay runs with the date range on the left hand side vertical column. the second pay run on the page is highlighted  
  4. Click the Actions tab.
  5. Click the   Export to Xero button.
    Screenshot of the details of a pay run with names and earning detailed. along the top is a menu bar with the option to export to xero highlighted in red.  

Re export Pay Run data

You can use the Re-export to Xero feature to transfer the finalised Pay Run data over to your Xero accounting platform.

Re-export a finalised Pay Run into Xero
  1. Log into your Employment Hero Payroll classic platform.
  2. Click the   Pay Run menu.
  3. Click the finalised pay run that needs re-exporting to Xero.
    Screenshot of pay runs with the date range on the left hand side vertical column. the second pay run on the page is highlighted 
  4. Click the Actions tab.
  5. Click the   Re-export to Xero button.
    Screenshot of the details of a pay run with names and earnings detailed. along the top is a menu bar with the option to re-export to xero highlighted in red. 

Disconnecting from Xero

The below premise will walk you through how to disable your Xero accounting integration.

Disable your Xero connection
  1. Log into your Employment Hero Payroll classic platform.
  2. Click the   Business Settings menu.
  3. Click the Payroll Settings submenu.
  4. Click the   Integrations button.
  5. Locate the Xero logo and click the   button. 
    Xero_5.jpg 
  6. Click the Disable button.
    Xero_6.jpg 

Error resolution

Your Xero account is already linked to a payroll and therefore is not available to select

If you receive this error message, then you need to within Xero, go to Settings Connected apps for Business Name here, and then disconnect the related app currently connected to the business.

Your Xero user does not have the required permissions to authorise the integration

Xero has updated their Accounting API authorisation requirements to align with user roles and permissions. As a result, existing integrations may begin returning authorisation errors if they were originally connected using a Xero user that no longer has the required permissions.

If you receive this error, within Xero, navigate to Settings and confirm the user who authorised the integration has either:

  • Adviser access, or
  • Standard access with permission to create Manual Journals.

Users with Read-only or Invoice-only access do not have sufficient permissions to authorise the Accounting API.

Once the user's permissions have been confirmed or updated:

  1. Disconnect the Xero integration in KeyPay.
  2. Reconnect the integration, ensuring you sign in with the Xero user that has the required permissions.
  3. Retry the journal export.

Further information

Can I write transactions to my Xero bank account?

The Xero API does not allow us to write transactions to a bank account. You have two options:

  • You can post your payroll info to Xero as a purchase invoice, much like the inbuilt Xero Payroll does now. When you do this, we reconcile the purchase invoice against the bank account transaction and do not need a transaction line written to the bank account.
  • You can post to Xero using a journal. If you do this, you will need to create a payroll clearing account that we can post to which you can then use to reconcile against the bank account.

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