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Currently Xero is set up to nil off both the Employer NI Expense GL and Liability GL as soon as payroll is run because employers NI contribution is always setoff against HMRC allowances.

However, it is important to have employers NI contribution cleared only when remittances are made to HMRC and when HMRC send allowances (which is always a month accrued). The allowances are setoff against the employers NI expense GL.

This treatment will allow the accountant to respond to remittances made to HMRC in terms of employers NI and allowances received from HMRC accordingly.

It will also allow the firm to know the total employers NI contributed or total allowances from HMRC so far in the year without going through the payroll report. And provides adequate reconciliations of HMRC allowances.

It is recommended that the current employers pension setup in Xero payroll where both the liability and expense are provided for should be adopted for employers NI setup.