Number of payroll employees limited by plan.
Xero updated its Australian version over the weekend with a payroll function which would make it more appealing to the 820,000 Australian businesses with employees, said Chris Ridd, Xero’s Australian managing director.
The update was a full import of Paycycle, a third-party payroll service which Xero acquired in July last year.
It included leave management, automatic tax table updates, payment summaries, timesheets and a portal where employees could access payroll details, payslips and apply for annual leave.
The takeup of Xero in Australia was slower than expected because it lacked integrated payroll, said Ridd.
“Australia is a different market. In other markets small businesses don’t see payroll as being part of the accounting software,” he said. “Back in the mid-90s when MYOB bought payroll into accounting software it changed the expectations of accounting software for ever.”
Australia was the only market which received the update. An integrated payroll wasn’t required in New Zealand to win over subscribers, Ridd added. “New Zealand has a healthy base of add-on payroll providers. There are no plans in the future to change that,” he said.
The US and UK markets had more pressing requests for features than payroll, although Xero would assess whether to include it at a later date, Ridd said.
While payroll was included for free, Xero has restricted its usage within its tiered plans. The $29 a month entry-level plan allowed for one payroll employee. The mid-level plan at $49 per month was limited to 20 employees.
The $64 a month large plan could payroll an unlimited number of employees and included free automatic superannuation payments.
“There’s a cost to us of providing that (automatic superannuation payments) service. Our competitors charge quite a hefty fee to include that,” Ridd said. “Once you get above 20 employees managing super payments is onerous.”
Another point of difference was the inclusion of free tax table upgrades. Revised tax tables for payroll was the main mechanism used by desktop accounting software vendors to drive annual upgrades.
“If you’re using MYOB and paying for tax tables it’s a significant cost. That’s the hook for things like MYOB Cover,” Ridd said.
Xero customers who had used Paycycle separately had their payroll data migrated into their Xero accounts over the weekend. The small number of Paycycle customers who didn’t use Xero would continue to be supported as a standalone service, Ridd said.
Applications which integrated with Paycycle would still work with payroll in Xero, said Stuart McLeod, former CEO of Paycycle and Xero general manager for payroll. “Over the next few months we’ll be working to bring the payroll API (application interface) in line with the rest of the Xero Oauth API,” McLeod said.