Xero launches US payroll service via Gusto integration

Xero has launched Xero Payroll in the United States through an integration with Gusto, adding payroll to its US financial management platform.

Built into Xero's software, the service links payroll with accounting, payments and analytics tools. It is aimed at small businesses that want to manage pay runs, bookkeeping and bill payments in one system rather than across separate applications.

The launch completes Xero's US product set across accounting, payments and payroll, an area it has described as a core strategic focus. Xero has been expanding that offering with partners including Gusto for payroll and Melio for payments as it seeks to broaden its position in the US small business software market.

Payroll remains a challenge for many smaller employers, particularly when payroll data is separate from accounting records. Using different systems can add administrative work, increase the risk of errors and make it harder for owners and advisers to track cash flow and financial performance.

Data cited by Gusto points to broader strain in the market. The share of small businesses that missed payroll altogether rose from about 1.5% in 2019 to about 2.3% in 2025, according to Gusto. Missed payrolls affected nearly 3.4 million workers in 2024.

Product features

Xero Payroll includes unlimited payroll runs, automated federal, state and local tax calculations and filings, direct deposit, multiple pay rates and schedules, W-2 support, 1099-NEC contractor payments, benefits calculations, paid time off management and employee self-service tools.

The integration automatically flows payroll information into Xero's general ledger. That gives businesses a more direct link between wage costs and wider financial records, which could matter to bookkeepers and accountants who often spend time reconciling data from different systems.

Xero is also offering free transfers of historical payroll data and access to payroll specialists for onboarding. Existing Gusto customers can move their payroll records into Xero Payroll so payroll and accounting data sit together on the same platform.

For accountants and bookkeepers, the combined system is intended to reduce manual reconciliation and improve visibility across client accounts. Advisers have become an important route to market for software groups targeting small businesses, especially in areas such as payroll and compliance, where owners often rely on outside support.

Matan Bar, Chief Executive Officer, US, at Xero, said the new payroll service reflects growing demand for more connected small business software.

"Payroll is one of the most important jobs a business owner has, but it shouldn't be one of the most stressful," said Matan Bar, US Chief Executive Officer at Xero.

"Small businesses increasingly expect the tools they use to work together, not operate in silos. Xero Payroll, powered by Gusto, brings payroll, accounting and payments into one connected system, so customers get greater clarity into their cash flow and more time back to focus on growing their business," Bar said.

The launch also extends Gusto's reach through a distribution partnership with another software platform serving small businesses.

"Small business owners didn't start their businesses to become experts in payroll taxes and compliance. They started them to follow their dreams and serve their customers," said Tomer London, Co-founder at Gusto.

"At Gusto, we've spent over a decade supporting hundreds of thousands of small businesses with payroll, compliance and tax filing. Now, with Xero Payroll, powered by Gusto, business owners can run payroll alongside the rest of their finances, with peace of mind that they're paying their teams quickly and compliantly," London said.

The release of Xero Payroll marks another step in the competition among software providers seeking a larger share of small business administration. Accounting, payments, payroll and compliance are increasingly being sold as linked services rather than separate tools. Xero Payroll is now available to eligible US customers.