Xero Timesheets for Recruitment Agencies

What Xero's native timesheet feature does

Xero's own timesheet tool, Xero Me, ships as part of every Xero Payroll subscription. An employee submits hours through the Xero Me app or web portal; a payroll admin reviews and approves them; and the approved hours feed straight into that employee's pay run. A recent addition lets employees record their actual start, end and unpaid-break times rather than just a total, which Xero positions as reducing manual correction before a pay run. Whichever way the hours are captured, the design point stays the same: one employer, one payroll, one pay run per approved timesheet — it's built for exactly what it sounds like, an employer running payroll for its own directly-employed staff.

Where native Xero timesheets fall short for a recruitment agency specifically

That's a genuinely different shape of problem to a recruitment agency's. Xero is an accounting platform, not a recruitment back-office platform, and it was never positioned as one — so this isn't a flaw in Xero, it's a gap in scope once you look at what an agency's timesheet actually needs to do:

• No external client approval. An agency needs the client — the hirer the contractor is placed with — to approve the hours before they're billable, not just an internal manager approving their own team's payroll. Xero Me's approval step is built for the latter.
• No AWR or IR35 tracking layered on the hours. Xero has no concept of a 12-week AWR clock or an IR35 status attached to an assignment — it processes the hours it's given, without any recruitment-specific compliance context.
• No self-billing invoice generation from an approved timesheet. Xero can hold and send an invoice you create, but it doesn't generate a contractor's self-billed invoice, under HMRC VAT Notice 700/62, directly from an approved timesheet the way a recruitment-specific tool does.
• One pay run, not two invoices. An agency needs both a client invoice (at the charge rate) and, for eligible contractors, a self-bill (at the pay rate) from the same approved hours — a different output shape to a single payroll run.

None of that is a criticism of Xero doing its actual job badly — it's simply not what Xero Me was built to do.

How Templio's Xero sync works

Templio connects to your Xero organisation once. When a timesheet is approved in Templio, it raises the client invoice and — for contractors who've accepted a self-billing agreement, with self-billing switched on for the agency's account — the contractor's self-billed invoice, both from the same approval. With Xero connected, both go across as drafts, carrying line-level detail (a description, quantity, unit amount and VAT per line), your reference/PO number, and the correct contact — so nothing posts to your accounts without a human looking at it first, and nothing has to be re-typed to get there.

Credit notes and voids follow the same drafted-not-posted principle: if a timesheet needs correcting after invoicing, Templio can raise a credit note or void the original in Xero rather than leaving a mismatched figure sitting in your accounts.

How payment status flows back

Xero's own webhook tells Templio only that an invoice changed — never what it changed to. Rather than guess from that alone, Templio reads the invoice's actual current status back from Xero, and only a genuine PAID status triggers reconciliation against the original Templio invoice. That matters in practice: Templio pushes every invoice as a draft, and Xero fires a webhook event on that initial creation too — treating every webhook event as "paid" would mark an invoice paid the moment it was created, before your client had done anything. Reading the status back, rather than trusting the event alone, is what keeps that from happening.

See our timesheet software for recruitment agencies page for the full workflow, pricing for what's included, or read our self-billing invoices guide for the HMRC rules the self-bill has to follow.

Setting up timesheet approval + Xero invoicing end to end

1. Contractor submits. A contractor gets a magic-link on their phone — no account, no app-store install — and submits hours against their contract.
2. Client approves by email. The hiring manager gets an email with the hours; they approve or reject in one tap, with no login required.
3. Templio works out the pay. Overtime, weekend and GOV.UK bank-holiday rates are applied automatically to the approved hours.
4. Both invoices are raised. The client invoice, at the charge rate, and — where self-billing applies — the contractor's self-bill, at the pay rate, are generated from the same approval.
5. Both sync to Xero as drafts. With Xero connected, they arrive with VAT and PO numbers attached, ready to review and send.

FAQs

Does Xero do timesheets? Yes — Xero Me, included with Xero Payroll, lets an employee submit hours that feed their own employer's payroll run. It's built for direct employees, not for a recruitment agency's contractor-and-client structure.

How do I set up timesheets in Xero? Xero Me is enabled as part of a Xero Payroll subscription; employees submit hours via the app or web portal and a payroll admin approves them into a pay run. For a recruitment agency's actual workflow — an external client approving a contractor's hours before two separate invoices are raised — that single-approver, single-pay-run design isn't the right shape, which is the gap Templio's own Xero sync is built to close.

Can contractors submit timesheets directly into Xero? Not in the way a recruitment agency needs — Xero Me is designed around an employer's own payroll employees, not placed contractors working for a third-party client. In Templio, a contractor submits via a magic link and the resulting invoices sync into Xero once the client has approved the hours.

Does Xero support timesheet approval by an external client, not just an internal manager? No — Xero Me's approval step is an internal payroll-admin function. External, client-side approval of a contractor's hours (the step a recruitment agency needs before it can invoice) isn't part of Xero's native timesheet feature; it's the specific gap Templio's client-approval-by-email workflow fills.

Do I need to disconnect Xero Me if I use Templio? No — they're not mutually exclusive, and most agencies using Templio for contractor timesheets still run Xero Payroll (and Xero Me) separately for their own directly-employed staff. Templio handles placed-contractor timesheets and invoicing; Xero Me handles your internal payroll team's hours. The two connect at the accounting layer, through Templio's Xero sync, not by replacing one with the other.

Xero's own product features change over time — check Xero's current documentation before relying on a specific detail about Xero Me. This guide describes Templio's own Xero integration accurately as of the review date above.