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Intuit

Set up vacation pay and accrual (CA only)

QuickBooks Desktop allows you to set up vacation time and accrual that can be used when paying employees.

Set up vacation pay

  1. From the Employees menu, click Employee Centre.
    • If the employee is already on the list, right-click the employee's name and choose Edit Employee.
    • If the employee is not yet on the list, click New Employee.
  2. From the Payroll Info tab, click Vacation Pay.
  3. Enter the Pay ($) available and Pay ($) used YTD.
  4. Select Retain if you would like QuickBooks to calculate and accrue vacation pay through the year.
  5. Select Pay every period if you would like QuickBooks to calculate the employee's vacation pay and add it to each of his or her pay cheques.
  6. The default Percentage value is 4%, enter a different Percentage if required.
  7. Select the appropriate Payroll Items under Earnings that accrue vacation.
  8. Click OK.

Adjust vacation pay

Important: Please note that changing the vacation available by going to Employees > Employee Centre > double-clicking an employee > Payroll Info tab > Vacation will not change the actual vacation accrual/liability amount for the employee. You will need to do this within the payroll module.

If you have adjusted the vacation pay for an employee, and accounts and reports should be affected by the adjustment, adjust the amount of vacation pay accrued on the next pay cheque for the employee.

  1. From the Employees menu, select Pay Employees.
  2. Select Scheduled Payroll or Unscheduled Payroll.
  3. Select the employee and click Continue.
  4. Verify the Cheque Options.
  5. Confirm the dates for Cheque Date and Pay Period Ends.
  6. Click on the name of the employee who requires an adjustment.
  7. From the Review Or Change Pay cheque window, enter in the pay cheque information.
  8. Under the Company Summary area, there is an item for VacPay-Accrued with an amount that is accrued on this pay cheque. Adjust this amount.
    • Example: If vacation pay available is $400.00, and only $100.00 is being displayed, an adjustment of $300.00 is needed. The accrued amount for this pay cheque is $35.00. You would change the amount to $335.00.
  9. Click Save & Close.
  10. Click Create Pay Cheques.

If you have adjusted the vacation pay for an employee and the the accounts and reports do not require adjustment, an adjustment can be made in the employee's information:

  1. From the Employees menu, select Employee Centre.
  2. On the Employees tab, double-click the employee.
  3. From the Payroll Info tab, click Vacation Pay.
  4. In the Pay ($) available as of field, enter the amount of vacation pay that is currently available for the employee.

Correct under accrued (overpaid) vacation for an employee still with the company

You may need to correct an over calculation of vacation accrual if an employee's accrued vacation was set up incorrectly and vacation pay is accruing at a rate higher than 4%.

  1. Create a Payroll Deduction
    1. From the List menu, choose Payroll Item List.
    2. From the Payroll Item drop-down, select New.
    3. Click Deduction, then click Next.
    4. Enter a name for the deduction (e.g. Vacation Accrual Adjustment).
    5. Leave the Enter name of agency to which liability is paid and Enter the number that identifies you to that agency fields blank.
    6. From the Liability Account drop-down, select the Expense account that is used on the Vacation Accrual payroll item, then click Next.
    7. From the Tax tracking type screen, choose Box 14/A - Employment Income, then click Next.
    8. From the Taxes screen, select all the taxes, then click Next.
    9. On the Calculate based on quantity screen, choose Neither, then click Next.
    10. Select whether to calculate on gross pay or net pay, then click Next.
    11. Leave the Default Rate and Limit fields blank, then click Finish.
  2. Create a pay cheque for the employee
    The Vacation Summary Report will still show the original amount in the VacPay - Accrued column but you will see correction in the Vacation used in VacPay-Accural Paid Out column.
    1. From the Employees menu, select Pay EmployeesUnscheduled Payroll
    2. Select the employee and click Open Pay cheque Detail.
    3. In the Earnings section, remove the Salary or Hourly from Item Name and choose VacPay - Accrual Paid Out.
    4. Enter the amount of the over calculation.
    5. In the Other Payroll Items section, select the Payroll Deduction (Vacation Accrual Adjustment), and enter the same amount as the VacPay Accrual Paid Out
    6. Click Save & Close. This will create a 0.00 amount cheque.  Also, note on the pay cheque details window that the Vacation Available amount will decrease.

Clear under accrued (overpaid) vacation for an employee no longer with the company

  1. From the Employees menu, select Payroll Setup > Set Up YTD Amounts
  2. Click Next.
  3. Enter the correct dates for When should YTD summaries affect accounts?, then click Next.
  4. Enter the correct date for the Earliest QuickBooks payroll date, then click Next.
  5. Select the employee's name, then click Enter Summary.
  6. On the YTD Adjustment screen, enter the overpaid amount in the Period Amount column beside VacPay-Accrued, then click OK.

Clear over accrued (underpaid) vacation for an employee no longer with the company

  1. Create a Vacation Pay Write Off payroll deduction item:
    1. From the Lists menu, select Payroll Item List.
    2. From the Payroll Item drop-down, select New.
    3. Select Deduction, then click Next.
    4. Enter a name for the deduction (e.g. “VacPay-Write Off”), then click Next.
    5. Select the name of agency to which the liability will be paid from the drop-down menu (optional).
    6. Leave the Enter name of agency to which liability is paid and Enter the number that identifies you to that agency fields blank.
    7. From the Liability Account drop-down, select the Expense account that is used on the Vacation Accrual payroll item, then click Next.
    8. From the Tax tracking type screen, choose Box 14 - Employment Income, then click Next.
    9. From the Taxes screen, select the appropriate taxes, then click Next.
    10. On the Calculate based on quantity screen, choose Neither, then click Next.
    11. Select whether to calculate on gross pay or net pay, then click Next.
    12. Leave the Default Rate and Limit fields blank, then click Finish.
  2. Create a pay cheque using VacPay-Accrued Paid Out as the earnings item for the amount paid out
    1. From the Employees menu, select Pay Employees.
    2. Select Unscheduled Payroll.
    3. Select the employee and click Open Pay cheque Detail.
    4. Under the Earnings section, select VacPay-Accrual Paid Out.
    5. Enter the underpaid amount.
    6. Under the Other Payroll Items section, select the VacPay-Write Off item you created above and enter the amount to zero out the VacPay-Accrual Paid Out amount. This should lead to a net $0 pay cheque.
    7. Remove any other payroll taxes or deductions
    8. Click Save & Close.

Create a report that will show vacation pay accrued and paid out for employees

  1. From the Reports menu, select Employees & PayrollPayroll Liability Balances.
  2. Click Customize Report.
  3. On the Filters tab, under the Filter section, select Payroll Item, then from the Payroll Item drop-down, click Multiple payroll Items
  4. On the Select Payroll Item screen, select the following payroll items:
    • Vacation Salary (if used)
    • Vacation Hourly Rate (if used)
    • VacPay-Accrued
    • VacPay-Accrual Paid Out
  5. Click OK.
  6. From the Display tab in the Modify Report: Payroll Liabilities Balances screen, change the selection for Display columns by to Payroll Item Detail.
  7. From the Header/Footer tab:
    • change the Report Title to "Vacation Pay Owing"
    • change the Company Name to the Employee's Name
  8. Click OK.
  9. To memorize the report for future reference, click Memorize > OK.