Integrate with Xero

Step 1: Connect to Xero from Gusto

You’ll need admin permissions in both Gusto and Xero to connect your accounts. Start here: 

1. Sign in to your Gusto admin account.
2. Go to the App directory.
3. Search for Xero and select it.
4. Click Connect.
5. Enter your Xero credentials.
   • If you're an accounting firm: First, select your firm. Then select the specific company you manage.
6. Click Authorize to allow Xero and Gusto to sync.
7. In the Detailed tab, map your chart of accounts.
   • For more help with mapping, check out the “Map your chart of accounts” section of this article.
   • Important: All Gusto categories must be mapped in order for your sync to work.

Step 2: Automate your mappings (Recommended)

Automating your mappings is optional but recommended to avoid sync errors. This lets you pre-select which Xero accounts should be used by default for new payroll categories. This means that when a new item is created in Gusto, you will not need to manually map it—Gusto will automatically apply your default mapping.

You’ll manage automated mappings in the Default tab. Click here for more details and next steps. 

Step 3: Choose your Bill settings

In the Settings section of the integration, go to the Manage tab to view or change your Bill sync settings. By default, payroll data posts to Manual Journals, and bill approval is automatic.

To choose how Gusto should post payroll data:

1. Next to "Xero Transaction Type," click Edit. 
2. Select either Bill or Manual Journal.
   • For Xero Partner Editions: Bill sync is not available.

To choose whether Gusto should automatically approve bills in Xero or require manual approval:

1. Next to "Bill Approval," click Edit. 
2. Select either Manual or Automatic approval.

Step 4: Choose your sync settings

In the Settings section of the integration, stay on the Manage tab to set up any additional sync preferences—such as whether the sync runs automatically or manually, or whether certain taxes should be consolidated.

Head to the section below for a description of each setting and how to set them up.

Below is each setting you can customize and how to do so.

Here’s how to get to any of these settings:

1. Sign in to your Gusto admin account.
2. Go to the App directory.
3. Search for Xero and select it.
4. Under “Settings,” go to the Manage tab.
5. Find the setting you’d like to review. See below to learn more about each setting.

Contractor payment sync

If you pay contractors through Gusto, decide how those payments should sync:

• Batch payments into a single entry (recommended for 30+ contractor payments): All contractor payments for a pay date will sync as one entry. Syncs (including auto-syncs) occur at 5pm PT on the payment processing date.
• Sync each contractor payment as a separate entry: Each contractor payment will appear as its own journal entry.

Employer tax consolidation

Choose how you want employer taxes to appear in Xero:

• Consolidate: Group all employer taxes into a single lump sum (e.g., "Payroll Taxes").
• Don’t Consolidate: List out individual tax amounts (e.g., Federal Unemployment, Social Security, Medicare, State Unemployment, etc.).

Journal entry consolidation

By default, Gusto consolidates entries of the same type into a single journal entry. You can also choose to group entries:

• By employee
• By department
• By job
• By project (if using Gusto Project Tracking)

To learn more about group mappings, check out the “Consolidated mapping and Xero tracking categories” section of this article.

Entry date options

Select when the journal entry should appear in Xero:

• Check date: This is the date your employees received their payments.
• Debit date: This is the date Gusto initiated the debit for taxes and net pay from your company’s bank account.
• End of pay period: This is the recorded end of the pay period.

Once you set up the Gusto and Xero integration, you can add a Gusto Payroll tab to your Xero dashboard for faster navigation between the two platforms. 

Add a Payroll tab to your Xero dashboard

Adding a Payroll tab to your Xero dashboard lets you quickly navigate from Xero to the Dashboard, Run payroll, Time off, Reports, or Integration settings sections of your Gusto account.

Follow these steps to set this up:

1. Sign in to your Gusto admin account.
2. Go to the App directory and choose Xero.
3. Select the Settings tab.
4. Enable the Xero Payroll navigation option.
   • To remove Xero Payroll navigation, select Disable.

The next time you sign in to Xero, you'll see a Payroll tab on your dashboard. All Standard users and Advisors will see this tab. The first time each Xero user clicks the Payroll tab, they'll be prompted to link their Gusto and Xero accounts. Linked users will only be able to navigate to pages they have admin permissions for. 

Unlink your Gusto and Xero logins   

If you've disabled the "Xero Payroll navigation" option, or no longer wish to have your user account connected, follow these steps to unlink your login. This does not disconnect the integration—it just removes your ability to sign in to Gusto from Xero.

1. Sign in to Xero.
2. In the upper-right corner of the page, click your account profile.
3. Select My profile.
4. Go to the Xero Sign On section.
5. Click Unlink Account.

If the "Xero Payroll navigation" option is enabled in your Xero accounting integration settings, you'll be prompted to re-link your account the next time you try to access any pages from the Payroll tab in Xero.

Here’s why mapping your chart of accounts matters:

• For payroll data to sync correctly, each payroll item must be mapped to an account in Xero.
• The more accounts you map to, the more detail your journal entries will have.
• Having more detailed journal entries gives you more granular reports in Xero (like Profit & Loss, Expense Reports, and Liability Reports).

Map your chart of accounts

1. In your Gusto admin account, head to the App directory.
2. Choose Xero.
   • This can be found under the Connected Integrations tab. 
3. Go to the Detailed tab.
4. Click any section (Wages & Salaries, Employer Taxes, etc.) to expand the view.
5. For each Gusto category, click the search box and choose the corresponding Xero account.
   • By default, Gusto only shows common account types for each category.
   • If you do not see the account you want, start typing the account name to find it.
   • If you’re still not seeing an account you’d like to use, create the account in Xero then click Refresh chart of accounts in Gusto.
   • Click here to learn more about types of accounts and commonly used pairings.
6. Repeat until you've selected an account for each Gusto category. Your progress is automatically saved as you go.
   • Unmapped categories will move to the top of the list.

Time-saving tips for the Mapping tab:

• If you’d like to map multiple items at once:
  • Check the box next to each item you want to map.
  • Click Actions at the top.
  • Choose Edit account type.
  • Type the account name and select it.
  • Click Submit.
• To show unmapped items only:
  • Next to "Actions," click the filter icon.
  • Select Display unmapped accounts only.
  • Click Apply.

Click here to learn more about mapping your accounts.

This integration now includes an AI-powered feature that helps you choose the right accounts when setting up mappings for your chart of accounts. This is especially helpful if you’re not sure which account to pick for a payroll category.

Example: Say you’re setting up default accounts and don’t know what to choose. Gusto might suggest using Payroll Wages for Wages & Salaries, or Payroll Deductions Payable for Deductions.

How suggestions are generated

Gusto’s AI provides recommendations based on:

• Industry standard accounting guidance from US-based CPA firms
• Common account structures used by thousands of small and mid-sized businesses
• Aggregated, anonymous patterns from other Gusto customers who use platforms like QuickBooks Online, Xero, and FreshBooks.

The AI model never stores or accesses your personal financial information. All suggestions are based on general patterns, not individual data.

Why default mappings matter

Over time, you may make changes to your Gusto account such as adding a custom deduction, creating a new earnings type, or setting up a new benefit. When this happens, new payroll line items are created in Gusto that need to be mapped to an account in Xero. If these items are not mapped, they can cause sync issues. Setting up default mappings can help you with this.

What default mappings do

Default mappings let you pre-select the Xero accounts that should be used for new payroll categories. This means that when you create a new line item, you will not have to manually map it to a Xero account—Gusto will automatically apply your default mapping to it.

• Example: If a new earnings type is created in Gusto, it will appear under "Wages & Salaries." If you’ve already chosen a default mapping for “Wages & Salaries,” the new line item will automatically map to the default Xero account without interrupting the sync.

Setting up default mappings is optional. If you prefer to manually map new Gusto categories, simply leave the default mapping blank.

Set up default mappings

Follow these steps to set up or change default mappings:

1. In your Gusto admin account, head to the App directory.
2. Go to the Connected Integrations tab.
3. Choose Xero.
4. Select the Default tab.
5. For each section (Wages & Salaries, Employer Taxes, etc.) you’d like to map, select the Xero account you want new categories to map to.
   • If you prefer to manually map new categories as they’re created, simply leave the default mapping blank.
6. Repeat for all sections.
   • Your selections are saved automatically.

Edit default mappings

You can change default mappings at any time in the Default tab. Changes will only apply to new mappings going forward. 

Edit detailed mappings

If a new category has been given a default mapping you’d like to change, you can change it in the Detailed tab. Here's how:

1. In your Gusto admin account, go to the App directory. 
2. Go to the Connected Integrations tab.
3. Choose Xero.
4. Select the Detailed tab.
5. Find the category you’d like to change and select the Xero account it should map to going forward. 
   • If you also want to change the default mapping for line items in that category going forward, go to the Default tab.

If past payrolls have already been synced to Xero with an incorrect mapping, you’ll need to manually re-sync those payrolls.

To provide more granularity, you have the option to map your chart of accounts by employee, job, department, or Gusto Projects (available to companies using Gusto Project Tracking). If you use Xero tracking categories, you can also assign a class to each of the selected grouping options.

This is optional.

Set up consolidated journal entries

Step 1: Choose your journal entry consolidation method

1. Sign in to your Gusto admin account.
2. Go to the App directory and select Xero.
   • You can also find this under the Connected Integrations tab.
3. Under Settings, go to the Manage tab.
4. Next to "Journal entry consolidation," click Edit.
5. Choose how you want to consolidate entries:
   • By employee: 
     • This can offer more detailed reporting. 
     • Ex: You can track each employee’s wages in separate accounts instead of one "Salaries and Wages" account.
   • By department:
     • This can help you track wages, taxes, and benefits separately. 
     • Ex: You can send Design wages to one account and Marketing wages to another, instead of combining everything into "Salaries and Wages." You can also map departments to Xero tracking categories if needed.
     • Click here to see how you can enable departments.
   • By job:
     • This can split wages, taxes, and benefits by role. 
     • Ex: You can track cashier wages and cook wages in separate accounts instead of sending all wages to "Salaries and Wages." If you use Xero tracking categories, you can also map jobs to each job to a tracking category for even more detailed reporting.
     • Click here to see how you can enable multiple job titles for employees.
   • By project:
     • Gusto Project Tracking must be enabled.
     • You can track wages, taxes, and benefits by project. 
     • Ex: Instead of all wages going to “Salaries and Wages,” you can split wages into separate accounts for each Gusto Project. 
6. Click Submit.

Step 2: Set up mapping overrides

Once you select a consolidation method, a new tab appears on the left. Ex: If you choose to consolidate by employee, the tab will be called Employee. If you choose to consolidate by department, the tab will be called Department.

You can override detailed mappings for individual employees, departments, jobs, or projects. Overriding detailed mappings in this tab means assigning different accounts to payroll items at these levels. This will not impact your mappings in the Detailed tab. 

This is optional—if no overrides are applied, journal entries will still be categorized according to what was set on the Detailed tab.

Here's how to override your mappings by consolidated category:

1. Find the new tab that corresponds to the consolidation method you chose.
   • Ex: If you chose to consolidate by employee, go to the Employee tab.
2. Click Edit.
   • If your company uses Xero Tracking Categories, you’ll first have the option to choose a tracking category at the top of this page.
3. If you want to adjust your mappings for this specific consolidation, select the new chart of account from the dropdown for the corresponding Gusto category.
   • This will only apply to this specific consolidation.

Contractor payments

Consolidating journal entries by employee and department is compatible with contractors.

Consolidating by job and project is not compatible with contractors. This is because job titles and Gusto Projects are not currently supported for contractor profiles. If your company pays contractors and uses job or project consolidation, contractor payments will be synced based on the default company mappings.

Follow these steps to send payroll data to Xero.

Note: Syncing payroll is only necessary when you’ve already run payroll in Gusto before setting up the integration, or if you have auto-sync disabled.

1. Sign in to your Gusto admin account.
2. Click the Pay section and select Pay History. 
3. Click on the payroll you would like to sync.
4. Click Sync at the top of the payroll detail page.
   • Note: If you have autosync enabled the data will automatically push over when you process payroll.
5. A timestamp will populate confirming the data was pushed over to Xero.
6. Sign in to your Xero account.
   • If you’re syncing a Manual Journal: You can find the posted journal in your Journal Report, which can be accessed from the Accounting menu.
   • If you're syncing a Bill: It will post to Accounts > Purchases.
     • If you chose to manually approve: Bills will sync over as “Awaiting Approval.”
     • If you chose to automatically approve: Bills will sync over as “Awaiting Payment.”

Note: If you do not see the Sync button, confirm your integration is still actively set up and is not disconnected.

View synced Bills in Xero

1. In Gusto, process a payroll.
2. If auto-sync is not enabled: Select Sync to send the entry to Xero.
   •  If auto-sync is enabled: Once you run payroll you’ll see a “Synced” status on the payroll summary in Gusto. 
3. Sign in to Xero. 
4. Choose Business.
5. Click Bills to pay. 
6. Under “Bills you need to pay,” find the new Bill for the payroll you ran.
   • The line items will now be tagged with Xero tracking categories based on your mapping selections.
   • Any employees or contractors not on a designated project will not have their corresponding payroll expense amounts tagged with a tracking category option.

If you have previously synced payrolls that aren’t mapped to Xero tracking categories, you can re-sync those payrolls if desired. Here’s how:

1. First, you may need to void any previously synced bills synced before March 21st, 2023. This will prevent duplicate entries from being created when you re-sync them. 
2. Sign in to Gusto.
3. Go to the Pay section.
4. Choose Pay history. 
5. Select the payroll you want to sync. 
6. Click Sync. 

To view the newly synced bills in Xero, follow the steps above.  

View synced Manual Journals in Xero

1. In Gusto, process a payroll.
2. If auto-sync is not enabled: Select Sync to send the entry to Xero.
   •  If auto-sync is enabled: Once you run payroll you’ll see a “Synced” status on the payroll summary in Gusto. 
3. Sign in to Xero.
4. Go to the Accounting menu and select Reports.
5. Under “Taxes and Balances,” click Journal Report. You can use the search field in the top-right corner.
6. Select the date range to search and the order to display the journals.
   • Optional: Select Show Tracking to show any tracking categories included in the manual journals. Choose Show Posted Manual Journals Only to eliminate any draft journals.
7. Click Update.
8. Select the journal you’d like to view.

Here are some common syncing errors and their resolutions.

Error message	Detail	Resolution
You’ve already reconciled payments against this Bill in Xero. Please "Remove & Redo" any payments applied to this Bill in Xero, and then try again.	The entry has already been reconciled and cannot be re-synced.	Remove and redo any payments applied to this Bill. Next, sync the payroll or payment from Gusto
You have reached the limit of invoices you can approve in Xero. Please update your Bill approval settings in the App Directory or upgrade your Xero plan.	You’ve reached the limit of invoices you can approve.	Change your bill approval settings in the Gusto App directory or upgrade your Xero plan.
This Bill has already been synced and approved in Xero. You cannot change the status from Approved to Awaiting Approval. To resync this Bill, you must first void it in Xero.	We cannot change the status of an approved bill.	Void the bill in Xero.

Because Gusto does not take any money for benefits or deductions, we include a mapping for a benefit or deduction expense and a benefit or deduction liability. This will create accounts within your accounting software that accrue an amount owed for the benefit or deduction over time.

When the benefit or deduction is then paid to the requesting party, you can offset your liability account and zero out the accrued amount owed.

Benefits always have two line items on the journal entry: 

• Employer Benefit Expense: This tracks the cost of employer contributions to benefits.
• Benefit Liabilities: This tracks the amount owed to the benefit provider. It's the total of employee deductions plus employer contributions.

Garnishments always have one line item on the journal entry for the garnishment liability. It tracks the amount owed for the garnishment/deduction.

Important: When money is pulled for an FSA or commuter benefit, before it is deducted through payroll make sure you don't create an expense but rather establish a receivable. It will be expensed in payroll when the amount is deducted. At that point with the deduction, then reduce the receivable.

Offset benefit liabilities 

Option 1: Create an entry from the bank debit (created by paying the benefit or deduction) and assigned that entry to the liability account to offset.

1. Sign in to your Xero Account.
2. Go to Accounts > Bank Accounts and open up Reconcile.
3. Locate the debit that corresponds with the payment of your benefit or deduction
4. Click Create from the right-hand column next to the debit.
5. Enter in the details, selecting the liability account under What.
6. Click Add Details to submit the entry.

Option 2: Create a Bill or Invoice and associate that item with the liability account.

1. Sign in to your Xero Account.
2. Go to the + in the upper right-hand corner and select Bill or Invoice under New.
3. Manually enter or select the liability account from the drop-down menu under Accounts.
4. Finishing creating the Bill or Invoice.
5. Click Save or Approve.

If you pay employees by check, we recommend you print the checks from Gusto.

If you prefer to print checks from within Xero, we recommend you use the Manual Journal sync option as an easy way to avoid double reporting. When you create the check in Xero, code the line item to the same Clearing Account that you have set up in your Xero account mappings to offset the account balance by the amount of the check.

If you're using Bill sync for your Xero integration, this is our recommended method for reconciling expenses if payments were all processed through direct deposit. You can use the Split function to reconcile the payroll invoice that Gusto sends to Xero with the two payroll bank transactions.

Step 1: Use the Split function to reconcile the first transaction

1. Sign in to your Xero account.
2. Under your bank account, click Reconcile Items.
3. There should be two Gusto bank transactions. Next to the first bank transaction, click Find & Match.
4. Find and select the Gusto payroll invoice that was synced to your Xero account.
5. Click the blue Split option next to the selected payroll invoice.
6. Enter the first bank account transaction amount.
7. Click Split. This will calculate the difference and allow you to apply only the amount of this one bank transaction to the invoice. Now the total should match the first bank transaction.
8. Click Reconcile.

Step 2: Reconcile the second transaction

1. Next to the second bank transaction, click Find & Match.
2. Find and select the same Gusto payroll invoice you just reconciled the first bank transaction to. The amounts should match perfectly.
3. Click Reconcile.

Disconnect your company's Xero Accounting integration

1. Sign in to your Gusto admin account.
2. Go to the App directory.
3. Click Accounting.
4. Click the Xero tile.
5. Click Disable Xero Integration on the right-hand side of the screen.
   • You will no longer be able to sync Gusto payrolls with Xero.
   • If you think you may want to sync again in the future, click Cancel below and then select No for auto-sync. This will stop the information transfer to Xero and will keep your mapping information saved.
6. Click Remove.

Choose a section below for frequently asked questions about this integration.