UK Payroll - Percentage-Based Payroll Tracking for Multi-Funder Allocation
Xero currently provides two tracking categories with multiple options, and also offers project tracking. However, these existing structures do not meet the needs of organisations that manage payroll funded by multiple external funders.
In many organisations, especially in the charity and grant-funded sector, a single employee’s payroll cost is often covered by three or more separate funding sources. These are not projects or internal cost centres. They are external funders who jointly or separately contribute to the cost of one employee’s role.
Current Limitation
Payroll does not allow direct allocation of an employee’s cost to multiple tracking category options linked to funders. As a result, organisations are forced to perform manual reallocations after payroll is run. This increases administrative workload and reduces reporting accuracy.
Project tracking is not a suitable alternative because funding streams are not project-based. They are ongoing funding arrangements that may span multiple employees and time periods without being tied to a specific project structure.
Proposed Enhancement
Introduce the ability to assign payroll cost allocations directly to tracking category options representing funding streams, with support for:
- Multiple funder allocation per employee.
- Percentage-based split across three or more funding sources.
- Automatic application of allocations to all payroll elements (salary, pension, employer taxes, and benefits).
- Consistent posting of payroll journals directly into the correct funding stream tracking categories.
Key Requirement
This is not project tracking. It is funding allocation tracking, where multiple external funders jointly support employee payroll costs.
Benefits
- Accurate reporting of expenditure against each funder.
- Removal of manual journal adjustments after payroll processing.
- Improved compliance with grant reporting requirements.
- Better visibility of how staff costs are distributed across funding sources.
- Reduced risk of reporting errors in multi-funder environments.
Example Scenario
An employee’s salary is funded by three separate funders. Each funder contributes a percentage of the total cost. Currently, Xero does not allow payroll to reflect this split directly. Organisations must manually adjust payroll journals each month to show correct funder allocation. This proposed feature would allow the allocation to be set once and applied automatically.
This improvement would significantly enhance Xero’s suitability for organisations managing complex funding arrangements across multiple external funders.
Abimbola Adeosun
shared this idea
Hi Abimbola Thanks for the great explanation of how adding multiple tracking codes to payroll costs using percentages would streamline the process of allocating this to fund providers.
We can see how this would help with complex funding arrangements so have moved this to Gaining Support.
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