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Add payrolling benefits in QuickBooks Online Advanced Payroll

by QuickBooks Online Payroll Advanced Updated 3 months ago

When handling payroll, including employee benefits can save time. Payrolling benefits in Advanced Payroll offers advantages like evenly spreading the benefit's cash value over the tax year. This amount is added to the employee's taxable pay per period and reflected on their payslips.

This article will cover:

  1. Turn on payrolling benefits
  2. Add a benefit category
  3. Link benefit to employees
  4. Set up pro-rate calculation
  5. Moving to Advanced Payroll
  6. Terminate an employee with payroll benefits

1. Turn on payrolling benefits

  1. Go to Payroll, and then Payroll Settings.
  2. In Pay Run Settings, select Benefit Categories.
  3. Select the arrow next to Processing options for more details.
  4. Select Payrolling.
  5. Select the tax year of your business registration.
  6. Select Save.

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2. Add a benefit category

  1. Select Add.
  2. Choose the Year (this is the start date for the benefit).
  3. If you want to carry the benefit forward to the next tax year, check the box.
  4. Select the benefit type and fill in the related fields.
  5. Select Save.

To make changes to the benefit category, select the pencil icon. To delete it, select the bin icon and confirm by selecting Delete.

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3. Link benefit category to employees

  1. Go to Payroll, and select the Employees tab.
  2. Select the employee's name to open their employee profile.
  3. Select Benefits.
  4. Select Add.
  5. Choose the benefit category.
  6. Fill in the necessary details in the fields related to the benefit type.
  7. Select Save.

Link multiple employees to a benefit

You can link benefits to multiple employees which can save you time, and help ensure that everyone gets the benefit that they're entitled to.

Note: Car benefits should only be added from the employee record.

  1. Go to Payroll, and then Payroll Settings.
  2. In Pay Run Settings, select Benefit Categories.
  3. In the Benefits section, select the link that says "No linked employees" next to the benefit.
  4. Search for the employees you wish to link to the benefit.
  5. Select Add.
  6. Select Save.

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4. Set up pro-rata calculation

Pro-rata calculation is a method used to calculate the portion of benefits an employee should receive based on their start and end dates. It helps ensure that employees are only entitled to benefits for the period they are actively employed.

  1. Locate and select Pro-rata.
  2. Enter the respective start and end dates for the employee.
  3. The calculator will show the recalculated pro-rata annual cost to you based on the dates you've entered.
  4. If you're happy with the amount, select Use new pro-rata. This will automatically update when you save.
  5. If you prefer to set your own value, leave the checkbox unchecked and enter your desired amount.
  6. You have the option to set the Pro-rata in the first pay run, which automates the necessary calculations when you run payroll.
  7. For pay runs after the first one, the calculation is based on the remaining cash equivalent, minus the amount already paid, divided by the number of remaining pay periods.
  8. If you specify an end date, the calculation will consider the number of days the benefit is available and stop including it once the end date has passed.

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5. Switching to Advanced Payroll

If you have switched to QuickBooks Online Advanced Payroll in the middle of the tax year and need to add benefits that were already processed in another payroll system, don't worry! You can still include them.

To enter opening balances when transitioning from another payroll system and bring over current leave balances and year-to-date earnings amounts, follow these steps:

  1. Payroll, and then select Payroll Settings.
  2. In Business Settings, select Opening Balances.
  3. Select the Tax Year.
  4. Select Save.

Next, you'll need to add the total amount that has already been paid to employees for these benefits. Here's how:

  1. Go to the employee's profile.
  2. Select the Opening Balances tab.
  3. Select the Earnings.
  4. Enter the amounts.
  5. Select Save.

Once you process payroll, the benefits will be included in taxable pay and will be reflected on the employee's payslip.

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6. Terminate an employee with payrolled benefits

Terminating an employee with payrolled benefits requires careful consideration. Here's what you need to know:

  1. Termination date: When terminating an employee, make sure to do it within their final pay run. This will help ensure that any outstanding amount for taxed benefits is included. Most benefits cover a full year, so the remaining amount will be added to the last pay and used to calculate the tax. These values will be reported to HMRC.
  2. Taxable pay: If the full amount cannot be taxed in the final pay period, HMRC will be aware of the taxable pay taken and will handle any tax owed directly with the employee.
  3. Terminating benefits: If the benefits are ending at the same time as the employee's leave, you need to terminate their benefits. This can be done from the employee's profile by adjusting the pro-rata dates, benefit date available, or cost to recalculate the outstanding amount. The update will be visible in the pay run. Note that for employees with payrolled benefits, you cannot set a termination date beyond the end of the current pay period.
  4. Payrolled benefits and termination: Terminating an employee using the Terminate option in their employee profile won't affect their payrolled benefits. Any outstanding amounts for these benefits must be reported to HMRC separately, outside of QuickBooks.

For detailed information on benefits, refer to the HMRC guidance.

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