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Find the help you need to prepare your business, communicate with customers, and support your employees during the COVID-19 outbreak in our resource centre.

Payroll set up: Vacation policies

Before you run payroll (and even before you add your first employee) it is helpful to set policies for vacation. Typically, hourly employees earn a minimum of two weeks of vacation per year.

For full-time employees, that’s 80 hours or 4%. Provinces may have additional rules and regulations.

If you’re not sure which rates apply to your employees, this is a great time to seek assistance from your tax advisor or a payroll expert. For more information regarding vacation policies, refer to Canada's labour standards.

Here's how to set up vacation policies:

1. Select the Gear icon, then Payroll Settings.

2. Select Pay Schedules.

3. From the Vacation and Sick Leave Policies, section, select Create.

4. Select Vacation from the category drop-down menu.

5. Enter a Description that will help you select the correct policy when you set up employees.

6. In the Vacation Pay field, select whether vacation is paid out automatically or retained.

7. Select the Frequency that vacation time accrues. Options include:

  • At the beginning of year
  • Each pay period
  • Per hour worked
  • On anniversary date

8. Enter the number of hours the employee can earn per year. Based on your selections, QuickBooks Online Payroll will automatically calculate the accrual rate for the employees assigned to this policy during the pay run.

9. Click OK.


  • you can set up pay schedules before you add employees, or you can set them up when you add employees.
  • the Vacation and Sick Report tracks accrued vacation using hours. For this report to track vacation accrued, you must choose each pay period in the frequency drop-down list.

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