How Xero Handles Timesheets

Xero doesn’t have a built-in timesheet module in its core accounting software. Instead, it uses Xero Projects to handle time tracking for employees and contractors. You create a project, assign team members, set hourly rates, and log time against specific tasks.

For businesses that don’t need full project tracking, tracking categories let you tag employee hours to departments, locations, or cost centres. It’s a lighter approach – useful if you just want to split payroll costs across different parts of the business without setting up individual projects.

If you’re running Xero Payroll in the UK, timesheets from Xero Projects feed directly into pay runs. That means the hours your team logs can flow straight through to PAYE calculations, National Insurance, and pension auto-enrolment without manual re-entry.

Best Apps That Work With Xero for Timesheets

Xero Projects works well on its own, but many businesses need more. Here are four popular options that connect and integrate with Xero UK:

Deputy – Handles scheduling and timesheets together. Staff clock in and out on their phones, and approved hours sync to payroll. Plans start around $4.50 per user per month. Good for shift-based businesses like hospitality or retail.

Harvest – Built for service businesses that bill clients by the hour. Tracks billable vs non-billable time, generates invoices from timesheets, and syncs with Xero for accounting. Free for one user, then $10.80 per seat per month.

Toggl Track – A simple timer that’s easy to use. Staff start and stop timers on desktop or phone, and managers review entries before syncing. Has a free tier for up to five users.

TSheets (now QuickBooks Time) – Originally a standalone product, now owned by Intuit. Still works with Xero despite the QuickBooks branding. Strong on GPS and geofencing for field workers. Starts at $8 per user per month.

From Timesheets to Payroll

Getting hours into Xero is only half the job. The real value comes when those hours drive your payroll process automatically.

With Xero Payroll UK, approved timesheets calculate gross pay based on each employee’s hourly rate. Xero then works out PAYE income tax, National Insurance contributions, and pension deductions under auto-enrolment rules. When you run payroll, it submits your Full Payment Submission (FPS) to HMRC in real time – that’s the RTI (Real Time Information) submission that UK employers are required to make every pay period.

Holiday pay and sick pay also tie into hours worked. The reporting tools in Xero can show you accrued holiday based on hours worked, which matters for part-time staff and anyone on variable hours. Under the Working Time Regulations, workers are entitled to 5.6 weeks of paid leave per year, and getting this wrong is a common source of HMRC penalties.

Can Employees Enter Their Own Timesheets in Xero?

Yes. With Xero Projects or any of the linked tools, employees can log their own hours. In Xero Projects, you invite team members to a project and they record time against tasks from the desktop or the Xero Me mobile interface.

Most businesses set up a timesheet approval workflow where a manager reviews and approves entries before they hit payroll. This is worth doing – it catches errors before they affect pay runs and gives you an audit trail if HMRC ever queries your records.

Xero Me also lets employees submit expense claims, request leave, and view their payslips. It’s a single download that covers time entry, expenses, and basic admin.

What Is the Best Timesheet App for Xero?

It depends on what your business actually needs. For project-based billing and client work, Harvest or Xero Projects are the strongest options. For shift scheduling, Deputy is hard to beat. And if you just want a simple timer that your team will actually use Xero with, Toggl Track has the lowest friction.

One thing to check before you choose: make sure it handles billable vs non-billable time if that matters for your business. Not every option distinguishes between the two, and you’ll want that split if you’re invoicing clients based on hours worked.

Setting Up Time Tracking in Xero

Here’s how to get started with timesheets in Xero Projects:

  1. Go to Projects in the main menu and create a new project. Add the client name, a deadline if you have one, and set the project estimate.
  2. Add team members and set their hourly rates – you can have different rates for different people on the same project.
  3. Create tasks within the project (e.g. “Bookkeeping”, “VAT return prep”, “Year-end accounts”). Each task can have its own budget.
  4. Your team logs time against tasks. They can do this from the web interface or Xero Me on iOS or Android.
  5. Review entries in the timesheet view. Approve hours, then either create an invoice from the logged time or push hours to your next pay run.

If you’re adding a third-party tool like Deputy or Harvest, the setup is similar – install it from the Xero marketplace, authorise the link, and map your employee records between the two systems.

For small businesses with a handful of staff, Xero Projects on its own is easy-to-use and usually enough to suit your business. But if you’ve got 10+ employees, shift patterns, or complex billing arrangements, a dedicated mobile-friendly tool will save you time in the long run.

Need help connecting hours to payroll in Xero? Get in touch with JacRox and we’ll sort it for you.