Your payroll payments questions answered
Find out more about payroll payments, how it works and where to get started with answers to our FAQs.
Overview
What are payroll payments in Xero?
Payroll payments let you pay your employees directly from Xero, without creating separate bank files or switching between systems. Using open banking and our payments partner Crezco, you can approve and send wages securely from your bank account in near real time.
Who can use payroll payments in Xero? Payroll payments are available to Xero customers in the UK who:
- run payroll in Xero
- pay employees in GBP to UK bank accounts
- have a bank or building society that supports open banking
- have a payroll admin with access to the business bank account to authorise payments
Payroll payments are currently only available for domestic payments in GBP. They cannot be used for international or foreign currency wages.
How do payroll payments work?
Once payroll payments are set up, paying employees is simple:
- Connect your bank account in Xero and allow data sharing with Crezco
- Set employees’ payment method to online bank transfer
- Run payroll in Xero and submit the wages for payment
- A payroll admin with bank access authorises the payment in their banking app or online banking
- Funds are transferred securely in near real time using Faster Payments
What is open banking?
Open banking lets you securely share your financial data between your bank and a third-party service provider to make payments. It gives you more choice, as well as greater control over your data.
Who is Crezco?
Xero has partnered with Crezco to provide open banking services in the UK. Crezco is a trusted payments institution authorised by the Financial Conduct Authority (FCA). Xero already works with Crezco to power bill payments, and this partnership now extends to payroll payments.
Does my bank or building society support open banking?
The number of banks and building societies in the UK that offer open banking is constantly growing.
We recommend checking with your financial institution to see if open banking is supported and if there are any banking rules or restrictions on the type of account or payment limits that may apply. Many banks currently only offer bulk payments for corporate and business accounts.
I already use Crezco outside of Xero, will my data be available in Xero?
If you already use Crezco outside of Xero, your historical data will not be migrated from Crezco to Xero when you set up payroll payments.
Note: To set up payroll payments you will need to connect your bank account to Xero.
Pricing
How much do online payroll payments cost?
Payroll payments are charged on a per-payment basis, in line with your Xero subscription plan.
A fee of £0.20 (excluding VAT) applies to each individual payroll payment. A payroll payment refers to each wage paid within a batch. For example, if you pay seven employees in one batch, the total processing fee is £1.40 (£0.20 × 7) plus VAT. This fee is added to the batch total and collected when you authorise the payment.
Some Xero plans include a monthly shared allowance for online payments. This allowance is shared across both bill payments and payroll payments combined.
- Xero Grow includes 5 online payments per month
- Xero Comprehensive includes 10 online payments per month
- Xero Ultimate includes 15 online payments per month
Once the shared allowance is exceeded, the per-payment fee applies to any additional payments.
Xero Ignite customers do not have an included allowance and pay the per-payment fee for every online payment.
All fees are charged in GBP, exclude VAT unless otherwise specified and may be updated by Xero in the future.
Will my bank charge me a fee to use online payroll payments?
Most same-day bank transfers are free using the Faster Payment Service (FPS), but we recommend checking with your financial institution to see if there are any additional fees associated.
Set up
How do I set up payroll payments?
Any payroll admin with bank account access can set up online payroll payments.
To get started, connect your bank and allow data sharing with Crezco. Then ensure your employees are set to be paid by online bank transfer. You can update this in the onboarding flow or directly in the employee profile.
How do I connect my bank?
Connecting Xero to your bank is simple (approx 1-2mins):
- Allow data sharing permissions with Crezco to enable open banking services
- Select your bank from the list in Xero
- Log in to your online banking when redirected
- Choose the bank account you want to pay wages from
- Confirm and complete the connection
Note: You will need to login to your online banking to complete the setup
I have already linked a bank account to Crezco for online bill payments. What do I need to do?
If you already use Bill Payments with Crezco, the bank account connected in Bills will also be available in Payroll. You can add additional bank accounts if you prefer to use a different account for payroll than for bill payments.
Can I connect more than one bank account?
Yes. You can connect multiple bank accounts to Crezco from within Xero. This allows you to choose different funding sources for payroll. These accounts should also be added as bank feeds in Xero so you can reconcile the transactions.
How do I disconnect payroll payments in Xero?
You can stop paying employees through open banking at any time without disconnecting payroll payments completely.
If you want to fully disconnect payroll payments for your organisation:
- Go to the Online payments tab in Pay employees and select Payment settings
- Click Disconnect service, then click Disconnect again to confirm. If you also use Crezco for bill payments, disconnecting here will remove that service as well
You can reconnect your organisation to payroll payments at any time.
Using online payroll payments
Who is responsible for processing my payments?
Payroll payments in Xero are processed by Crezco Limited, which is authorised and regulated by the FCA as a Payment Institution (Firm Reference Number 1027543).
How do I use payroll payments?
To pay employees using payroll payments follow these simple steps:
- Open a posted pay run
- Select Make payment
- Choose Pay online within Xero
- Select the bank account
- Select Authenticate and pay and follow the prompts
Are there limits on the amount of money I can pay per day?
Yes. All banks cap the total amount you can transfer per day through the Faster Payments network, and may also apply limits to individual batches. Check with your bank to confirm these limits.
How much can I pay in a single batch of payroll payments?
The amount that you can pay in a single batch will be dependent on the payment limits of your bank. We recommend you check this with your bank.
Can I schedule payroll payments to be paid later?
No. Payroll payments cannot currently be scheduled for a future date directly from Xero.
I have multiple people involved in the payroll payment process, is there an approvals workflow?
Not yet. You can allow others to help prepare wages for payment, but someone with access to the business bank account must log into Xero and authorise the payment.
Do I need to add my payees in my online banking prior to making a payment?
Yes. If your bank has Confirmation of Payee enabled, make sure the employee name in Xero matches the account holder name, or the payment may fail. You will also need to add Xero as a trusted beneficiary in your banking contacts.
You’ll also need to add Xero as a trusted beneficiary in your bank or building society account as a payee.
- Santander, Natwest or RBS: we recommend adding your payee details such as account number, sort code, account name, a reference and the type of account (personal or business) to your online banking contacts.
- HSBCnet or HSBC Corporate: we recommend setting up BACS permissions in your online banking. To do this, simply login to your HSBC Online Banking and follow the prompts to add BACS payments.
What will my employees see on their bank statement when I make a payment?
Employees will see your business name as the payer, along with the payment reference you provide. This ensures they know the payment has come from you.
To ensure the correct reference number is passed through to your employee’s bank account for the payroll payment, use the ‘Payment reference’ to enter the details.
How do I see the status of my payments?
You can check the Online payments page in Xero to view the status of payroll payments. You can access the Online payments page via the Pay Run list page. If a payment fails, you will also receive an email notification.
When will my employee(s) get paid?
Payments are processed by Crezco through open banking in near real time using Faster Payments. When successful, funds are available to the recipient almost immediately.
How quickly will I see the statement line in Xero?
Once a payment is authorised, it will appear under Accounting > Account Transactions in Xero. The timing of the statement line depends on your bank feed.
Can I reverse a payroll payment?
Payroll payments cannot be reversed from within Xero. If you need to reverse a payment, you must contact your bank directly.
One or more of my payments have failed. Why has this happened?
If there is an issue with a payment, Xero will display an error message (at the time the payment has been authenticated). You will also receive an email notification. The most common cause of failed payments is insufficient funds, please ensure you have reviewed the daily limits for your bank account and are aware of any banking rules (Crezco website) before paying employees in Xero.
Can I pay employees in foreign currency?
No, you cannot pay employees in foreign currency at this time.
Can I make other payments such as bills and expenses?
Yes. In addition to payroll, you can also use Xero to pay supplier bills through our existing partnership with Crezco. Bill payments work in much the same way — you connect your bank account, authorise payments through your bank, and funds are transferred securely using open banking.
You can find out more about bill payments in Xero here.
Can I still use payment files?
Yes. Online payroll payments is an additional alternative payroll payment option. If you prefer, you can continue to manually pay employees using payment files.
Xero Partners: Using payroll payments for clients
Can I use this feature on behalf of my clients?
Yes. Accountants and bookkeepers can help prepare wages for payment. However, someone with access to the client’s bank account must authorise the payment.
Can I use payroll payments for my own Practice?
Yes, you can set up payroll payments in Xero for your own practice.
Security and Access
How do I know open banking is safe?
Open banking uses rigorously tested software and security systems. You’ll never be asked to provide access to your bank login details or password to anyone other than your own bank or building society. Only third party apps and websites provided by companies which are regulated by the FCA or European equivalent can enrol in the open banking Directory. You choose when, and for how long, you give access to your data.
Will I be able to authenticate my payments?
Yes, security checks, such as multi-factor authentication (MFA) will be enabled by your bank or building society account to prove it is you making the payment.
Note: If your bank is unable to process bulk payments you will be asked to authenticate for each individual payment in a batch. We recommend checking for any banking rules (Crezco website) before paying employees in Xero.
What if there are multiple signatories on my bank account?
If your account requires dual signatories, the payment will remain in “Processing” until all signatories authorise it through their banking app or online banking.
Each signatory must have notifications enabled so they know to approve the payment. Once approved, the status in Xero will update to “Sent.”
Is my money and data secure?
We’re committed to the security of your data and provide multiple layers of protection for the personal and financial information you trust to Xero. You can read more about the measures we take to protect and secure data on our security page. Our privacy notice also sets out how we process your own personal data that you enter into Xero – like your name and email address.