Payroll accounting software for small businesses

Published Tuesday 13 January 2026

Table of contents

• What is payroll accounting software?
• How payroll software saves your business time
• Essential features to look for in payroll software
• Australian compliance made simple
• Give your employees what they need
• Choosing the right payroll software
• Take your employees' needs into account
• Make payday a better day
• FAQs on payroll accounting software

Key takeaways

• Prioritize payroll software with automated calculations, Single Touch Payroll compliance, and integration with your accounting system to reduce errors and ensure you meet Australian tax obligations.
• Implement employee self-service features that allow staff to access payslips, update personal details, and manage leave requests to reduce administrative workload and improve accuracy.
• Choose cloud-based payroll software that automatically updates tax rates and compliance requirements, eliminating the need for manual updates and reducing the risk of costly regulatory mistakes.
• Recognize that reliable payroll systems prevent workplace disruption by ensuring accurate, on-time payments, which maintains employee trust and allows you to focus on growing your business.

What is payroll accounting software?

Payroll accounting software is a tool that helps you manage everything related to paying your employees. It automates complex tasks like calculating wages, tax, and superannuation. This means you can run payroll accurately and on time, without the need for manual spreadsheets or calculations.

Think of it as a smart tool that handles your payroll tasks for you. It keeps your records organised, ensures you meet your tax obligations, and gives you and your employees easy access to important information like payslips and leave balances.

How payroll software saves your business time

Running a business means your time is precious. Payroll software gives you more of it back by automating the most time-consuming parts of paying your staff. Instead of spending hours on manual data entry and calculations, you can run your entire pay run in just a few clicks.

Here's how it helps:

• Automates pay and deduction calculations for you
• Generates and sends payslips to employees automatically
• Simplifies reporting to tax authorities like the ATO, which requires businesses to report period gross salary and pay as you go (PAYG) withholding for each pay event

By handling these repetitive tasks, the software frees you up to focus on what you do best: growing your business.

Essential features to look for in payroll software

Choosing the right software is easier when you focus on a few key features. A good payroll system should simplify your processes and grow with your business.

Look for software that includes:

• Automated calculations: For tax, leave, and superannuation to reduce errors
• Employee self-service: A portal or app for employees to view payslips, apply for leave, and update their details
• Single Touch Payroll (STP) compliance: To report payroll information to the ATO as required
• Integration with accounting: Links with your main accounting software to keep your books up to date
• Flexible pay calendars: Lets you pay employees on weekly, fortnightly, or monthly schedules

Australian compliance made simple

Staying on top of payroll regulations in Australia is crucial, but it doesn't have to be a headache. The right software is designed to help you meet your obligations with confidence.

Payroll software helps you stay compliant by automatically updating tax rates and handling Single Touch Payroll (STP) reporting requirements for you, with more detail in this payroll compliance guide. It calculates superannuation contributions correctly and can even help you manage entitlements like annual and sick leave. This built-in support reduces the risk of costly mistakes and gives you peace of mind.

Give your employees what they need

Reliable payroll systems prevent workplace disruption and maintain employee trust. When payments are accurate and on time, employees stay focused and productive.

Your payroll software should provide:

• Automated direct payments: Guarantee on-time salary deposits without manual intervention or delays
• Fast tax code updates: Quickly adjust for legislative changes and personal circumstances like marriage or parenthood
• Accurate tax calculations: Prevent underpayment hardship and overpayment cash flow issues
• Employee self-service access: Allow staff to update personal information and reduce administrative errors
• Leave management tracking: Monitor holiday balances and streamline approval workflows
• Expense processing: Reimburse employee claims quickly to maintain satisfaction
• Automatic deductions: Handle superannuation, healthcare, and pension contributions without errors, which is critical when a single unpaid super case can leave an employee’s retirement balance more than $30,000 better off once recovered.

Choosing the right payroll software

Quality payroll software automates complex calculations and gives your business extra benefits:

• Automated tax reporting: Links directly to your accounting system so you can generate compliant reports with one click
• Streamlined employee onboarding: Lets you add new staff and process departing employees with minimal paperwork
• Reduced IT costs: Gives you cloud-based software without expensive upgrades or maintenance
• Mobile accessibility: Helps you approve payments and check figures from any device, anywhere
• Automatic compliance updates: Keeps you current with changing tax laws and employee benefit regulations

Take your employees' needs into account

Accurate payroll builds employee trust and protects your business reputation. ATO responses to employee complaints can involve reviewing almost 2 years of potential unpaid super on average, so getting payroll right from the start matters. Strong payroll systems help you avoid costly setbacks and protect your long-term business reputation.

Choosing reliable payroll accounting software ensures accurate, timely payments. This keeps employees focused on their work rather than worrying about their pay, which directly supports business growth and success.

Make payday a better day

Xero Payroll eliminates the stress of payroll compliance by reducing manual calculations and errors. Automate the process and get time back.

• Calculate pay and deductions for you automatically
• Create payslips for your employees each payday
• Support simple online tax reporting

Learn more about payroll with Xero or try Xero for free.

FAQs on payroll accounting software

Here are answers to some common questions about payroll accounting software.

What software do accountants use for payroll?

Accountants and bookkeepers often use integrated platforms like Xero that combine accounting and payroll in one place. This allows them to manage a client's books and payroll efficiently, ensuring all financial data is consistent and up to date.

Is payroll software suitable for a very small business?

Yes, absolutely. Payroll software is scalable and offers huge benefits even if you only have one or two employees. It saves you time on admin, reduces the risk of errors, and ensures you're compliant from day one, letting you focus on establishing your business.

How does payroll software handle superannuation?

Good payroll software automates superannuation calculations based on current regulations. It tracks contributions for each employee and can streamline the payment process through a clearing house, ensuring your payments are made correctly and on time.