Xero Payroll vs. Gusto: Which is right for you? [2026]

Choosing between Xero Payroll and Gusto comes down to a simple question: Do you need a payroll solution that integrates seamlessly with your existing accounting software, or do you need a powerful, all-in-one HR platform that handles payroll, benefits, and onboarding? Xero Payroll is the natural extension for businesses already committed to the Xero ecosystem, especially outside the US. Gusto is a standalone, US-focused powerhouse designed to manage your entire employee lifecycle, from hiring to retirement.

Each serves a different primary purpose. Xero adds payroll functionality to its core accounting product, while Gusto bolts robust accounting integrations onto its core HR and payroll platform. Understanding this fundamental difference is the key to picking the right tool for your business.

What is Xero Payroll?

Xero Payroll is an integrated feature designed to manage payroll directly within the Xero accounting software. Instead of being a separate, standalone application, it functions as a module built to work in sync with your general ledger, accounts payable, and financial reporting. Its main goal is to eliminate manual data entry between your payroll and accounting systems, creating a single source of truth for all employee-related expenses. Primarily serving small to medium-sized businesses in Australia, New Zealand, and the UK, Xero has been steadily expanding its payroll capabilities for the US market. It handles core tasks like calculating pay, processing direct deposits, and managing tax obligations in its supported regions.

What is Gusto?

Gusto is a dedicated cloud-based platform that combines payroll processing with a comprehensive suite of human resources (HR) tools. Designed for US-based SMBs, it is an all-in-one solution that manages not only payroll and tax filings but also employee benefits, onboarding, time tracking, and HR compliance. Gusto operates as the central hub for all people-related operations and integrates with various accounting software, including Xero and QuickBooks. Its key value is simplifying complex HR tasks and providing employees with a modern self-service portal to manage their pay stubs, benefits enrollment, and personal information, making it a favorite among startups and growing businesses that need more than just a payroll calculator.

Comparing Xero Payroll vs. Gusto

While both platforms pay your team, they are built with different philosophies. Xero Payroll treats payroll as an accounting function, while Gusto treats it as an HR function. This distinction shows up in their features, pricing, and ideal user.

Feature / Aspect

Xero Payroll

Gusto

Primary Function

Integrated payroll within Xero accounting

Standalone payroll, HR, and benefits platform

Region of Availability

Australia, UK, New Zealand, expanding in the US

United States only (all 50 states)

Payroll & Tax Filing

Automated payroll and tax filing in supported regions

Fully automated federal, state, and local tax filings

HR Features

Basic leave management; advanced features via integrations

Full suite: Employee onboarding, documents, org charts, time tracking

Benefits Administration

Not available directly; relies on third-party integrations

Full brokerage for health, dental, vision, 401(k), workers' comp

Pricing Model

Add-on to a Xero subscription, priced per employee

Monthly base fee plus a per-employee fee

Accounting Integration

Seamless, real-time sync with Xero's general ledger

Integrates well with Xero, QuickBooks, and other tools

User Experience

Consistent and familiar for existing Xero users

Highly praised for its modern, intuitive design for all users

Payroll and Tax Filing Capabilities

Both systems expertly handle the core function of paying employees correctly and on time. Gusto has a significant edge in the US market because it was built from the ground up to manage the complexity of US payroll taxes. It automates W-2 and 1099 filings, as well as federal, state, and local tax payments across all 50 states. Gusto's "autopilot" feature can run payroll without any manual intervention once set up, which is a major time-saver for small businesses.

Xero Payroll also automates tax calculations and filings but its strength is region-dependent. For businesses in Australia, the UK, and New Zealand, it provides robust, localized compliance features like Superannuation and Single Touch Payroll (STP) in Australia. In the US, its payroll functionality is managed through a partnership with Gusto for full-service payroll in some states, which means for full US capabilities you are often using a Gusto-powered service inside Xero anyway.

Winner: Gusto, for its comprehensive and native handling of US federal, state, and local tax complexities.

HR and Benefits Administration

This is the clearest area of difference. Gusto is far more than a payroll processor; it's a lightweight human resource information system (HRIS). It offers:

• Full-Service Onboarding: Digital offer letters, I-9 and W-4 collection, and custom onboarding checklists.
• Benefits Management: Gusto is a licensed health insurance broker in most states, allowing you to manage and administer medical, dental, vision, HSAs, FSAs, and 401(k) plans directly within the platform.
• HR Tools: Features include employee directories, organization charts, performance reviews, and secure document storage.
• Time Tracking: Integrated time tracking tools allow employees to log hours, which sync directly with payroll.

Xero Payroll focuses almost exclusively on the payroll calculation and payment process. It has basic features for leave management and employee records, but it does not offer benefits administration, robust onboarding workflows, or advanced HR tools. To get this functionality, you would need to connect Xero to other third-party HR applications from its marketplace, breaking the "all-in-one" appeal.

Winner: Gusto, by a wide margin. It is a true payroll and HR platform.

Pricing Structure

Gusto and Xero approach pricing from different angles. Gusto uses a common SaaS model with a monthly base fee plus a per-employee, per-month charge. As of 2026, its "Simple" plan starts at approximately $40 per month plus $6 per employee. This predictable pricing makes it easy to budget for, but the base fee can feel costly for very small businesses with only one or two employees.

Xero Payroll is sold as an add-on to a core Xero accounting subscription. This means you must first be a Xero customer. The payroll add-on itself usually carries a simple per-employee per-month fee. For instance, in the US, payroll is bundled into certain Xero plans which already include the accounting software. For a business already paying for Xero, simply adding on payroll can be more cost-effective than paying for a separate service with its own base fee.

Winner: It depends. Xero Payroll is often more economical for businesses already invested in the Xero ecosystem. Gusto's model is better for companies that want an HR platform regardless of their accounting software choice.

Integration and User Experience

Nothing beats the integration of Xero Payroll with Xero accounting. Because it's a native module, payroll journals are posted automatically, bank reconciliation is simplified, and all financial data lives in one place. The user interface is consistent with the rest of Xero, making it feel immediately familiar to existing users.

Gusto, while a separate platform, has excellent integrations with major accounting systems, including Xero, QuickBooks Online, and others. The connection is reliable and syncs payroll data automatically, but it's still an integration between two different systems. Where Gusto shines brightly is its overall user experience. It's frequently praised for its clean, friendly, and intuitive design, not just for administrators but especially for employees. The employee self-service portal is modern and makes it easy for staff to view pay stubs, update information, and manage their benefits without bothering HR.

Winner: Tie. Xero wins for the seamlessness of its ecosystem integration, while Gusto wins for its superior standalone user and employee experience.

Which One Should You Choose?

The right choice comes down to your business's location, existing systems, and HR needs. Here is a straightforward guide to help you decide.

Choose Xero Payroll if:

• You run your business on Xero. If you're already deeply integrated with Xero for bookkeeping, invoices, and expenses, adding Xero Payroll is the most efficient choice for a unified financial workflow.
• You are based in Australia, the UK, or New Zealand. Xero's payroll product is most mature and feature-rich in these countries, with built-in compliance for local regulations.
• You only need core payroll. If you don’t require benefits administration, extensive HR tools, or detailed onboarding workflows, Xero Payroll provides exactly what you need without overwhelming you with extra features.

Choose Gusto if:

• You are a US-based business. Gusto is built specifically for US payroll tax laws at the federal, state, and local levels and manages that complexity better than nearly anyone else.
• You want an all-in-one HR and payroll platform. If you need to offer health benefits, manage employee onboarding, and track time all in one place, Gusto is the clear leader.
• Employee experience is a priority. Gusto's modern, self-service portal is a tangible perk for your employees, empowering them to manage their own information and reducing your administrative burden.
• You use QuickBooks or another accounting software. As a standalone platform, Gusto integrates beautifully with a variety of tools, so you aren’t locked into a single accounting ecosystem.

Final Thoughts

This decision is not about which payroll software is "better," but which is structurally a better fit. Xero Payroll is the logical, efficient choice for businesses already running on Xero, particularly outside the US, that view payroll as a key accounting task. Gusto is the superior choice for any US-based business that views payroll as part of a larger HR and people-management strategy.

As you set up payroll, especially when dealing with employees in different states, questions about tax withholding, nexus obligations, and state-specific filing rules are bound to come up. Doing this research across various state tax websites can be time-consuming. We built Feather AI to solve this by providing instant, reliable answers from authoritative tax sources, complete with citations you can use to finalize your payroll setup with complete confidence.