Xero remains a practical payroll option for Australian businesses that use its broader accounting features. However, businesses paying for an accounting package mainly to process payroll may benefit from comparing standalone payroll software.

The right decision depends on your employee count, accounting requirements, pay conditions and the amount of workforce administration you want the software to handle.

This guide compares the available approaches, explains how to calculate the real cost and provides a detailed process for changing payroll systems safely.

This article provides general information only and is not legal, tax, accounting or payroll advice. Product features, prices and regulatory requirements can change. Confirm current information with the software provider, Australian Taxation Office, Fair Work Ombudsman and your professional adviser before acting.

 What happened to Xero’s Payroll-Only plan? 

Xero previously offered a lower-cost Payroll-Only plan for Australian employers that wanted to process payroll without subscribing to a broader accounting package.

As part of Xero’s Australian plan changes introduced in 2024, the Payroll-Only plan was withdrawn and affected customers were moved towards Xero plans that bundle accounting and payroll functionality.

This is historical context rather than a new announcement. The more relevant question in 2026 is whether the accounting and payroll features included in Xero’s current plans justify the total cost for your business.

Screenshot of a post by a user on Xero's customer portal as of 11 July 2024.

Last Xero pricing check: 23 June 2026. Xero has announced that updated Australian subscription prices will apply from 1 July 2026. Prices and plan inclusions should be checked on the official Xero Australia pricing page via xero.com/au/pricing-plans/

▶Does Xero still offer payroll in Australia?

Yes. Xero continues to provide Australian payroll through eligible Xero accounting plans.

The number of people that can be paid through payroll varies by plan. Based on Xero’s published plan information reviewed on 23 June 2026:

• Grow includes payroll for two people.
• Comprehensive includes payroll for five people.
• Ultimate plans are available with payroll capacity for 10, 20, 50 or 100 people.

Additional charges may apply when a business exceeds the payroll capacity included in its plan. The invited users or people paid through payroll may also affect usage charges, so employers should review the detailed plan conditions rather than relying only on the advertised base price.

The discontinued Payroll-Only product should not be confused with Xero’s current payroll functionality. Payroll remains available, but it is now supplied within broader accounting packages.

▶Why this matters for small employers

Some small businesses use Xero extensively for invoicing, bookkeeping, bank reconciliation, BAS preparation, expense management and financial reporting. For these businesses, having payroll in the same platform may be convenient and cost-effective.

Other employers mainly require:

• Payroll processing.
• Single Touch Payroll reporting.
• PAYG withholding calculations.
• Superannuation calculations and processing.
• Payslips.
• Employee payroll records.
• Leave accruals and balances.

Bundled accounting software can provide good value when the business uses the complete package. It may be less efficient when the employer is paying for accounting functions that are rarely used or already managed through another system or adviser.

 Is Xero still the right payroll option for your business? 

The decision should not be based on subscription price alone. Start by identifying whether your business needs accounting-led software, workforce-led software or a combination of specialist systems.

▶Staying with Xero may make sense when…

• You already use Xero heavily for bookkeeping, invoicing, bank reconciliation, BAS and financial reporting.
• The payroll capacity included in your plan suits your employee count.
• Your employees have relatively straightforward pay arrangements.
• Your accountant or bookkeeper manages the business within Xero.
• Your payroll and accounting processes already operate efficiently.
• The implementation effort and disruption of changing would outweigh the likely benefit.

▶A standalone payroll system may make sense when…

• Your business mainly needs payroll and STP reporting.
• Your employee count pushes you into a more expensive accounting plan.
• Employees work under modern awards, enterprise agreements or varied employment conditions.
• You regularly calculate overtime, penalty rates, allowances or leave loading.
• Rostered hours frequently differ from actual hours worked.
• Timesheets are manually re-entered into payroll.
• Rostering, attendance, leave and payroll data are held in disconnected systems.
• You require detailed payroll reporting, approval controls or audit trails.
• You want to keep Xero for accounting while processing payroll through a specialist system.

Standalone payroll software is a system primarily designed to calculate employee pay, manage payroll records and report payroll information without requiring the employer to purchase a complete accounting package.

▶Questions to ask before deciding

1. Do we use enough of Xero’s accounting features to justify the complete package?
2. How many current and future employees need to be included in payroll?
3. Are employees covered by modern awards or enterprise agreements?
4. Do we calculate overtime, penalties, allowances or leave loading?
5. Are rostered hours regularly different from hours worked?
6. Do managers approve timesheets before payroll is processed?
7. Do we need rostering, attendance, HR or leave management tools?
8. Can payroll journals or approved timesheets be transferred to our accounting system?
9. What implementation, migration, training and support services are included?
10. Are data setup and award configuration charged separately?
11. What will the annual cost be after employee charges and add-ons?

 Xero payroll versus standalone payroll software 

▶Accounting-led versus workforce-led software

Xero is primarily an accounting platform with payroll capability. It brings payroll into a broader financial system that includes invoicing, bank reconciliation, BAS reporting, bills and business reporting.

Dedicated payroll software and workforce systems are built around employee pay, working time, attendance, leave, workforce rules and payroll controls.

Neither approach is automatically superior. Suitability depends on how the business operates and where most of its administrative complexity occurs.

Features can differ between packages and may require optional add-ons. Confirm the precise workflow, inclusions and limitations with each provider.

 How much does payroll software really cost? 

Advertised monthly prices rarely provide a complete comparison. Employee charges, minimum licence requirements, add-ons, implementation and support can materially affect the annual cost.

▶Calculate the annual subscription cost

Xero costs use the published subscription prices applying from 1 July 2026 and exclude introductory discounts. ClockOn calculations use annual Standard pricing, exclude optional add-ons, implementation and GST, and assume a five-licence minimum. Obtain a formal quote before making a purchasing decision.

These examples are not a feature-for-feature comparison. Xero includes broader accounting functionality that is not included in ClockOn Standard. The figures are intended to show why businesses should compare the total cost of the system model that suits them.

▶Consider the cost of payroll administration

The subscription is only one component of payroll cost. A lower-priced product may still be expensive to operate if employees, managers or payroll administrators spend significant time re-entering and correcting information.

Estimate the time spent on:

• Entering or importing timesheets.
• Checking missing or unusual hours.
• Calculating awards, overtime and penalty rates.
• Correcting payroll errors.
• Entering information in both payroll and accounting systems.
• Obtaining manager approvals.
• Answering employee pay enquiries.
• Processing off-cycle corrections or back payments.
• Paying an external bookkeeper or payroll provider.

A credible savings calculation should always identify the employee count, package, billing frequency, add-ons, GST treatment and price-check date.

 What should an Australian payroll system include? 

▶Essential payroll and STP functions

A payroll system should provide the functions required to calculate, record and report employee payments. Depending on the business, these may include:

• PAYG withholding calculations.
• Single Touch Payroll Phase 2 reporting.
• Payslip generation.
• Employee payroll records.
• Leave accruals and balances.
• Superannuation calculations.
• Deductions and allowances.
• End-of-year finalisation.
• Payroll reports.
• Data export and backup options.

STP is the system used to report employee salary and wage, PAYG withholding and superannuation information to the ATO when payroll is processed. Businesses can review recognised products through the ATO Software Product Register.

ClockOn Payroll and ClockOn Online are listed on the register. However, appearing on the register does not mean the software automatically makes every payroll correct.

Employers should also check that the system supports their approach to Payday Super from 1 July 2026 and confirm the applicable payment, clearing and processing workflow.

▶Workforce functions that may reduce payroll errors

Payroll errors often begin before the pay run. Incorrect hours, missed approvals, outdated rates and disconnected records can all affect the final result.

Useful workforce functions may include:

• Digital timesheets.
• Manager approvals.
• Time and attendance records.
• Rostering.
• Configured award interpretation.
• Employee self-service.
• Leave management and approval workflows.
• Payroll variance reporting.
• Audit trails.
• HR, qualification and work-right records.

Connecting approved hours with payroll through timesheet payroll software can reduce duplicate entry. Managers can review worked hours before the payroll administrator applies the approved information to the pay run.

▶Support and implementation

Payroll software should also be assessed on the assistance available during setup and ongoing operation.

Ask each provider about:

• Australian payroll support.
• Employee data migration.
• Payroll and ruleset configuration.
• Parallel pay runs.
• Administrator and manager training.
• Award and allowance setup.
• Email, phone and ticket support channels.
• Typical response times.
• Responsibility for checking opening balances.
• Fees for setup, training or support.

A system can contain extensive payroll functionality while still producing incorrect results if it is configured with the wrong classifications, rates or opening balances.

 Can you use ClockOn with Xero? 

Businesses do not always need to choose between ClockOn and Xero. Xero can remain the accounting platform while ClockOn manages payroll, employee time or other workforce processes.

▶Using ClockOn for payroll and Xero for accounting

One possible workflow is to process payroll through ClockOn and transfer payroll journal information to Xero for accounting and reconciliation.

ClockOn’s available Xero workflows can also support approved timesheets being transferred into Xero as a draft payroll for review. The correct workflow depends on where payroll will be processed and which ClockOn package or integration is selected.

Before implementation, confirm whether the proposed connection transfers:

• Approved employee timesheets.
• Timesheet costings.
• Draft payroll information.
• Completed payroll journals.

These are different workflows. A payroll journal export is not the same as sending timesheets into a draft pay run, and neither should be described as complete two-way synchronisation unless data genuinely moves in both directions.

The main objective is to reduce duplicate entry while preserving clear responsibility for payroll approval and accounting reconciliation.

▶When an integrated approach may suit a business

• Pharmacy: A pharmacy may use ClockOn to interpret configured award rules and calculate employee time while retaining Xero for accounting.
• Medical practice: A practice may track employee attendance across multiple sites before processing payroll and transferring the accounting journal.
• Retail: A retailer may compare rostered labour with actual hours and approve exceptions before payroll.
• Growing business: A business may add HR, leave and onboarding controls without replacing its established accounting platform.

 How to change payroll software safely 

Changing payroll software affects employee records, leave balances, tax reporting and year-to-date payroll information. A controlled migration reduces the risk of duplicated STP figures, incorrect balances and inaccurate employee payments.

▶Step 1: Choose the most practical changeover date

The start of a financial year is often administratively simpler because the new system can begin without transferring current-year payroll totals.

A mid-year change is possible, but year-to-date gross payments, PAYG withholding, superannuation, allowances, deductions and other STP amounts must be handled carefully.

Avoid changing systems immediately before a high-volume or unusual pay period where possible. Allow enough time for setup, training, testing and correction before the first live pay run.

▶Step 2: Export and preserve existing payroll records

Export the information required to configure the new system and preserve the records you may need after access to the former product ends.

This should include:

• Employee names and contact details.
• Tax file number declaration information.
• Employment basis and commencement dates.
• Employee payroll IDs.
• Pay rates and ordinary hours.
• Awards, classifications and agreements.
• Allowances and deductions.
• Superannuation fund details.
• Leave balances.
• Employee bank details.
• Year-to-date gross, PAYG and superannuation figures.
• Terminated employee records.
• Payroll reports and payslips.
• STP submission and finalisation records.

Employee tax, banking, superannuation and payroll data is sensitive information. It must be transferred, accessed and stored securely.

▶Step 3: Configure employees and pay rules

Do not assume that imported data is correct because it came from the existing payroll system. Review each employee’s current conditions as part of the migration.

• Check whether the employee is full-time, part-time or casual.
• Confirm ordinary hours and pay frequency.
• Check rates against the applicable award, agreement or employment contract.
• Configure allowances, penalties, overtime and leave loading.
• Enter and reconcile leave balances.
• Confirm superannuation fund details.
• Check deductions and salary sacrifice arrangements.
• Confirm STP income types and reporting categories.
• Check employee payroll IDs.

▶Step 4: Decide how STP history will be handled

The correct STP process depends on when the migration occurs and whether year-to-date amounts will be transferred into the new system.

The ATO provides specific guidance for employers changing payroll solutions or employee payroll IDs.

The selected process may require the employer to consider:

• Whether year-to-date amounts will be transferred.
• How the former payroll records will be updated.
• Whether employee payroll IDs will remain the same.
• The payroll branch identifier.
• The business management software ID.
• How terminated employees will be treated.
• How duplicate income statements will be prevented.

▶Step 5: Run payroll in parallel

A parallel pay run processes the same payroll period in the old and new systems so that the results can be compared before the new system becomes the official payroll record.

Compare every material payroll component and investigate each variance. Do not assume that a small difference is immaterial when the same configuration will be used across future pay runs.

▶Step 6: Complete final checks before the first live pay run

• Confirm employee bank details.
• Test the ABA or payment file process.
• Confirm employee payslip access and email addresses.
• Check STP authorisation and submission settings.
• Confirm the superannuation payment process.
• Review employee leave balances.
• Obtain formal payroll approval.
• Retain evidence of testing and corrections.

▶Step 7: Deactivate the old system carefully

Do not cancel the former system immediately after the first successful pay run.

• Export all required payroll reports and payslips.
• Retain evidence of the final successful STP submission.
• Confirm final invoices and contractual notice periods.
• Document which system contains historical and current records.
• Confirm that authorised staff can still access required archived information.

The Fair Work Ombudsman states that Australian employers generally need to keep time and wage records for seven years. Records must be accessible, legible, in English and not false or misleading.

 Payroll software migration checklist 

▶Before migration

• Confirm the scope, pricing and contract terms of the new system.
• Select a target go-live date.
• Assign responsibility for migration and approval.
• Review current ATO guidance for changing payroll products.
• Confirm implementation and training requirements.

▶Data preparation

• Export employee and payroll records.
• Reconcile year-to-date payroll totals.
• Reconcile leave balances.
• Review employee IDs, rates and employment conditions.
• Store exported files securely.

▶System configuration

• Create employee records.
• Configure pay rates and ordinary hours.
• Configure awards, overtime, penalties and allowances.
• Enter leave and year-to-date balances where required.
• Configure STP, superannuation, banking and accounting workflows.

▶Parallel testing

• Process the same payroll period in both systems.
• Compare gross pay, PAYG, superannuation and net pay.
• Compare deductions, allowances and leave accruals.
• Investigate and document every variance.
• Repeat testing after material configuration changes.

▶First live payroll

• Confirm manager and payroll approvals.
• Check payment and bank file details.
• Submit and verify STP.
• Distribute payslips.
• Confirm the superannuation process.
• Retain payroll reports and approval evidence.

▶Post-migration review

• Review employee queries after the first pay run.
• Reconcile payroll with the accounting ledger and bank.
• Check leave balances after accrual processing.
• Review the next STP submission.
• Document final procedures and responsibilities.
• Retain access to historical records for the required period.

 Common mistakes when switching payroll systems 

▶Comparing only the advertised base price

Employee charges, minimum licences, accounting integrations, rostering, attendance tools, implementation and support can materially change the total cost.

Calculate a complete annual estimate for your employee count and required workflow.

▶Assuming software automatically guarantees award compliance

Payroll software must be configured with the correct award, classification, rate, employment status and rules. Employers remain responsible for paying employees correctly.

Review rates and conditions against the applicable award, enterprise agreement or employment contract.

▶Losing access to historical payroll records

Export payroll reports, payslips, STP records, employee information and leave balances before cancelling the former service.

Confirm how records will remain accessible for the applicable retention period.

▶Duplicating STP year-to-date figures

Changing payroll software during the financial year can create duplicate employee income statements when year-to-date amounts and payroll IDs are not handled correctly.

Follow the current ATO process for the migration method you select.

▶Importing incorrect leave balances

Leave balances should be reconciled to the final approved payroll in the old system before they are imported.

Check hours, units, entitlement categories and any adjustments separately.

▶Skipping the parallel payroll

A small configuration difference can affect every future pay run. Parallel processing helps identify issues before employees are paid through the new system.

▶Treating an accounting integration as full automation

An integration may transfer approved timesheets, costings, draft payroll data or completed journals. These functions are not interchangeable.

Identify what transfers automatically, what must be reviewed and which system remains the source of truth.

 Should you keep Xero payroll or use a separate payroll system? 

 How ClockOn supports payroll beyond STP reporting 

ClockOn is an Australian payroll and workforce management system rather than a general accounting package.

Depending on the selected package and configuration, ClockOn can help businesses:

• Process Australian payroll and STP reporting.
• Connect approved employee time with payroll.
• Apply configured pay rules for overtime, penalties and allowances.
• Manage leave requests, approvals and balances.
• Maintain employee information and payroll records.
• Reduce duplicate timesheet and payroll entry.
• Produce payroll and workforce reports.
• Retain Xero for accounting where required.
• Add rostering, HR and employee-management tools as requirements grow.

ClockOn may suit businesses that want payroll, employee time and workforce processes managed in one Australian system while continuing to use Xero as their accounting platform where required.

Businesses that do not have the internal capacity to process payroll can also consider outsourced payroll services rather than changing software alone.

 Final decision: should you replace Xero payroll? 

Keep Xero payroll when the bundled accounting and payroll package suits your employee count, financial processes and administration requirements.

Consider standalone payroll software when payroll is the main requirement, the bundled accounting features are not being used or your workforce conditions are becoming more complex.

Consider ClockOn with Xero when you want specialist payroll, employee time and workforce tools without replacing Xero as your accounting platform.

The most useful comparison is not simply Xero versus ClockOn. It is the total annual cost and operational suitability of:

• Accounting and payroll in one system.
• Standalone payroll software.
• Specialist payroll connected with separate accounting software.

Calculate what you currently spend, list the functions your business actually uses and identify where payroll administration is consuming the most time.

 Frequently asked questions 

▶Can I use Xero only for payroll in Australia?

Xero payroll is currently provided through eligible Xero accounting plans rather than the former Payroll-Only plan. Check current plan inclusions, employee limits and usage charges before subscribing.

▶What replaced Xero’s Payroll-Only plan?

The former Payroll-Only plan was withdrawn when Xero introduced a revised range of bundled accounting plans. The appropriate current plan depends on the number of people paid and the accounting functionality required.

▶Is there a cheaper alternative to Xero payroll?

A standalone payroll system may cost less when the business does not require a complete accounting package. Compare employee charges, minimum licences, required add-ons, implementation, support and GST treatment before deciding.

▶Can I use different software for payroll and accounting?

Yes. A business can process payroll in a dedicated payroll system and transfer approved information or payroll journals to its accounting platform. The exact workflow depends on the available integration.

▶Can ClockOn integrate with Xero?

ClockOn provides Xero integration options that can support payroll journal, timesheet costing or approved-timesheet workflows. Confirm which data will be transferred and whether payroll will be processed in ClockOn or Xero.

▶When is the best time to change payroll software?

The start of a financial year is often administratively simpler. A business can change systems during the year when year-to-date payroll figures, employee IDs, leave balances and STP reporting are handled correctly.

▶Do I need to run parallel payrolls when changing software?

A parallel pay run is strongly recommended. It allows the employer to compare gross wages, PAYG withholding, superannuation, leave, deductions, allowances and net pay before relying on the new system.

▶What payroll records should I export before leaving Xero?

Export employee details, payroll reports, payslips, leave balances, pay rates, superannuation information, deductions, allowances, STP records and year-to-date payroll figures before cancelling access.