Quickbooks automatically keeps track of vacation hours and associated pay accumulated for employees. For the employees, it would seem that they are taxed in the fiscal year that they use their vacation pay (i.e. when they are paid). But, Quickbooks seems to add vacation pay as a payroll expense every pay period, which would make it an expense in the pay period it is earned and not when it is used. Furthermore, if an employee receives a pay rise between accruing vacation and using it, I thought that the employee is paid their current hourly rate.
Thus, I have two questions for Canada (Québec) tax and labour standards:
1. As an employer, do I include vacation pay accrued as an expense (for my business taxes) in the year it is accrued or the year it is used (paid out)?
2. Does an employee accrue vacation hours or pay ($)? For holiday time taken, ff they have earned vacation hours (at the legal 4%), should they receive vacation pay at the pay rate when it was earned or the pay rate when it is taken?
And if the way that Quickbooks calculates it does not match Canadian tax and labour standards, is there a way to change the settings?
Charlotte Higgins
