Xero has launched Xero Payroll, powered by Gusto, integrating payroll with accounting and payments for small businesses in the US.
The launch completes what the company describes as its 3x3 strategy, which centres on three core functions for small businesses: accounting, payments, and payroll. The new offering is built into the Xero platform and connects payroll with accounting, payments, and analytics, allowing business owners to manage payroll, bookkeeping, and bill payments within a single system.
For many small businesses in the US, payroll continues to represent a complex and time-intensive administrative task. Running payroll separately from accounting and payment systems can increase the risk of errors and make it more difficult to maintain an accurate view of overall business performance.
According to data cited by Gusto, the proportion of small businesses that missed a payroll run rose from approximately 1.5% in 2019 to approximately 2.3% in 2025. The company estimates that nearly 3.4 million workers were affected by missed payrolls in 2024, underlining the operational and compliance risks associated with fragmented payroll processes.
Platform capabilities
Xero Payroll, powered by Gusto, includes unlimited payroll runs, automated federal, state and local tax calculations and filings, direct deposit, support for multiple pay rates and schedules, W-2 processing, 1099-NEC contractor payments, benefits calculations, paid time off management and employee self-service functionality.
Because payroll data feeds directly into Xero's general ledger, businesses gain a consolidated financial record and a clearer picture of how payroll costs affect cash flow. In order to support the transition to the new system, Xero is offering free historical payroll data transfer along with access to payroll specialists during onboarding. Existing Gusto customers can migrate their payroll records into Xero Payroll while keeping their data within a single environment.
Matan Bar, US CEO at Xero, said payroll remains one of the most significant responsibilities for business owners and that combining payroll, accounting, and payments into one system is intended to give customers greater visibility into cash flow. Tomer London, co-founder at Gusto, said the integration allows business owners to manage payroll alongside their broader finances while maintaining compliance with tax and payroll obligations.
Implications for advisors and the wider ecosystem
Beyond individual business owners, the integration is also aimed at accountants and bookkeepers who support small business clients. Moreover, through the process of combining payroll and accounting data within one platform, advisors may benefit from more consistent financial records and reduced time spent reconciling data across separate systems.
The launch reflects a broader trend among small business software providers toward consolidating financial functions, as connected systems become increasingly central to how small businesses manage operations. Xero's payroll offering, combined with Gusto's payroll infrastructure and Melio's payments capabilities, forms part of the company's broader effort to build an integrated financial management platform for small businesses and their advisors in the US.
