Accounting software company Xero has inked a deal with US payroll platform Gusto and has pulled the pin on the development of its own payroll product.

As a consequence of stopping its own US payroll product, Xero will incur a NZ$16.2 million non-cash impairment of assets. The adjustment would be recognised in the first half of the 2019 financial year.

Xero said the move would allow the company to redeploy resources in other markets and projects.

The company said the alliance allows Xero to better serve the US market with a full-service payroll offering that meets the needs of customers working across 50 US states, each with different payroll tax requirements.

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Gusto handles all aspects of payroll on behalf of the small business owner, including all federal, state and local payroll taxes.

"The strategic alliance is expected to enhance Xero's North American customer proposition and is also consistent with its US strategy communicated in 2017 to drive sustainable growth through accounting partners," Xero said in a statement to the ASX.

"The strategic alliance with Gusto is an important step in the implementation of our US growth strategy," Xero chief executive Steve Vamos said.

New Zealand-based Xero, which has 1.4 million subscribers in more than 180 countries, de-listed from the NZX late last year in favour of a primary listing on the ASX.