How to Sync Leave Balances with Xero Payroll

For Australian and New Zealand businesses using Xero, the gap between leave tracking and payroll creates a recurring problem. Approved leave sits in one system, and the payroll team manually enters it into Xero before each pay run. That process is slow, error-prone, and creates compliance risk when leave data does not match between the two systems.

Leave Balance connects directly to Xero Payroll through the Xero API. Approved leave flows into Xero automatically, accruals stay in sync, and every pay run reflects accurate leave data without anyone copying rows between spreadsheets.

Key Takeaways

• The integration pushes approved leave from Leave Balance into Xero Payroll automatically
• Leave accruals and balances sync between the two systems in real time
• Setup takes about 15 minutes using OAuth authentication through the Xero app marketplace

Why Xero Payroll Sync Matters for Leave Management

In Australia, Single Touch Payroll (STP) Phase 2 requires employers to report leave payments accurately each pay run. Incorrect leave data in Xero creates STP reporting errors that can trigger ATO correspondence. The most common cause of these errors is manual data entry between the leave system and Xero.

When leave balances are out of sync, three things go wrong:

1. Overpayments. An employee’s approved leave is entered into Xero twice, or entered after the employee has already been paid. The employee is overpaid, and recovering the difference requires a payroll adjustment.
2. Underpayments. Leave approved in the system is forgotten during the pay run. The employee is underpaid and must be corrected in the next cycle.
3. Accrual discrepancies. Leave accruals calculated in the leave system do not match what Xero shows on the payslip, creating confusion and support tickets.

An integration eliminates all three by making the leave system the source of truth and Xero the calculation engine that processes the data.

How to Set Up Leave Balance to Xero Sync

Step 1: Verify Your Xero Plan Supports Payroll API

Xero Payroll API access is available on Xero Standard, Premium, and all plans that include payroll. If you are on the Xero Starter plan, payroll API access is limited. Check your Xero subscription before starting.

Step 2: Authorise Leave Balance in Xero

From your Leave Balance account, navigate to Settings > Integrations > Xero and click “Connect to Xero.” This opens the Xero OAuth consent screen.

1. Select the Xero organisation you want to connect
2. Approve the requested permissions (leave data read/write, employee data read)
3. You will be redirected back to Leave Balance with the connection confirmed

The connection uses OAuth 2.0, meaning Leave Balance never stores your Xero password. The authorisation can be revoked at any time from either the Leave Balance or Xero settings.

Step 3: Map Leave Types

Leave Balance needs to know which of your Xero leave types corresponds to each leave type you have configured. For example:

Leave Balance Type	Xero Leave Type
Annual Leave	Annual Leave
Personal/Carer’s Leave	Personal Leave
Long Service Leave	Long Service Leave
Compassionate Leave	Compassionate Leave
Unpaid Leave	Unpaid Leave

Xero comes with standard leave types. If you have custom types in Xero, the mapping interface lets you match them.

Step 4: Configure Sync Settings

Choose when data flows:

• Auto-sync on approval: Each time a leave request is approved in Leave Balance, the corresponding entry is pushed to Xero immediately. This is the recommended setting for most businesses.
• Sync before pay run: Leave Balance batches approved leave and pushes it to Xero when you trigger a sync, typically just before running payroll.
• Bidirectional balance sync: Leave Balance pulls current accrual balances from Xero to display alongside Leave Balance’s own calculations. This is useful when Xero is the system of record for accruals.

Step 5: Run a Test Pay Run

Create a test employee in both systems and submit a short leave request. Verify that:

1. The approved leave appears in Xero Payroll under the employee’s leave record
2. The next pay run includes the correct leave deduction
3. The payslip reflects the leave taken
4. Accrual balances update in both systems after the pay run

What Data Syncs Between Leave Balance and Xero

Data	Direction	Frequency
Approved leave requests	Leave Balance → Xero	Real-time on approval
Leave cancellations	Leave Balance → Xero	Real-time on cancellation
Leave type mapping	Leave Balance → Xero	On config change
Employee records	Leave Balance ↔ Xero	On connect, then on change
Accrual balances	Xero → Leave Balance	On pay run completion
Pay run leave data	Xero → Leave Balance	After each pay run

Best Practices

• Keep Xero as the payroll source of truth. Leave Balance syncs approved leave into Xero, but Xero should be where payroll decisions are made. Do not override Xero’s calculations from the leave system.
• Set up a sync error notification. Configure Leave Balance to email your HR team if a sync to Xero fails. This typically happens when the OAuth token expires or an employee record is missing in Xero.
• Reconcile monthly. Run a monthly comparison of Leave Balance leave records against Xero pay run data. This catches any edge cases where the sync missed an entry, such as leave approved during a sync window.
• Update employee records in one system first. When an employee’s name, email, or role changes, update it in your primary system and let the sync propagate. Updating both simultaneously can create race conditions.

FAQ

Does the integration support New Zealand payroll?

Yes. Leave Balance connects to both Australian and New Zealand Xero organisations. The leave type mapping interface supports NZ-specific leave types such as Alternative Holidays and Bereavement Leave.

What happens if Xero is down when leave is approved?

Leave Balance queues the sync and retries automatically. Once Xero is available again, the approved leave is pushed without any manual intervention. You can check sync status in the Leave Balance integration dashboard.

Can I sync historical leave data?

The integration syncs forward from the connection date. Historical leave that was entered directly into Xero remains in Xero but is not pulled into Leave Balance. If you need historical data in Leave Balance, use the CSV import feature.

Does this affect Single Touch Payroll reporting?

The integration improves STP accuracy by ensuring the leave data in Xero matches the source data in Leave Balance. Approved leave is pushed before your pay run, so STP reporting reflects current information.

Can I disconnect the integration without losing data?

Yes. Disconnecting the integration stops future syncing but does not delete any data already transferred. Leave records in Xero remain, and leave records in Leave Balance remain. You can reconnect at any time.