How do I set up a new employee in Xero?

Bringing in a new hire is an exciting time for a business. Your team, profits, customer pool, and business in general are all growing. So let’s start by saying congratulations! With all this exciting progress, it’s important not to lose sight of the details. Setting up a new employee in Xero is an important step that, if done proactively and correctly, will save you time and frustration in the future. 

Setting up Xero Payroll 

If you’ve not already, ensure that you’ve signed up for a Xero Payroll subscription. The cost of this subscription will vary depending on the size of your team. Then, under the Payroll Settings tab, fill in the required details for your organization, HMRC, and your pay calendar. 

If this is your first employee, we recommend consulting with your accountant to ensure everything is set up correctly. You’ll need to, for example, set up a pension scheme with a pension provider. This is a legal obligation for any employer, and failing to meet these requirements could result in fines or even prosecution. We can help you choose which pension scheme is best for your business and your team. 

Adding a new employee to payroll 

The first step of adding a new employee to your Xero Payroll is selecting the ‘Add a New Employee button. This will then take you to a page to fill in all of your new employee’s details. There are three fields that are compulsory to fill out – ‘Details’, ‘Employments’ and ‘Taxes’ – however, we do recommend filling out as much as you can. The more information you provide to begin with, the less work there is to do later on.

 Some of the information you’ll be asked to provide include: 

• Personal details: this includes their full name, date of birth, address and phone number, start date, salary, and more. It’s helpful to be aware of what you’ll be asked on this page so you can get the proper information from your new employee. 

• P45: a P45 is a form issued by your employee’s previous employer that details their salary and the taxes they’ve paid so far in the current tax year. 

• Pension eligibility and enrolment: If your new employee is earning more than £10,000 per year, is over 22 years of age, and under state pension age, you’re required to enroll them in a pension scheme. 

Saving time with Xero 

Like all aspects of bookkeeping, setting up your payroll correctly from the beginning will benefit you greatly. Providing accurate and complete information means that both you and your employee are protected – incomplete or inaccurate payroll information would prevent your month end submissions from going through. Naturally, this isn’t an issue you want to be surprised with on payday. 

At Saint & Co, we love Xero for the ease and efficiency of service it provides. Whether you want to handle your payroll yourself or leave it up to our team of Xero Champions, you’ll have real time access to all your important numbers and an intuitive service that won’t take hours of your time to use.

To learn more about the services Xero provides and how Saint & Co can help you run your business smoothly and efficiently, visit our Xero Services page here.