If your policy is to give employees 120 vacation hours at the start of the year, they have all their vacation time available right away. This is considered a liability for the company, Elaine.
When employees use their accrued time, the hours taken will reduce their remaining vacation hours balance.
A percentage of an employee's gross wages (e.g., 4% or 6%, based on years of service) is calculated during each payroll run. This amount is saved in QBO as "Vacation Pay," which represents the money the employee will get when they use their vacation hours.
When employees take vacation leave, QBO reduces their accrued vacation hours and pays them for those hours based on their regular hourly wage. For example, if an employee takes 40 hours off, QBO calculates their pay for those 40 hours and updates their vacation pay balance.
If an employee resigns, is terminated, or requests a payout, their accumulated vacation pay (based on the percentage of their earnings) is paid out in their final paycheck.
For more details on how vacation accrual works in QuickBooks, check out this article for information on the topic: Vacation accrual in QuickBooks Online Payroll FAQ.
Don't hesitate to comment below if you have any additional questions about vacation hours in QuickBooks Online.
