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Level 1

Payroll frequency change and possible schedule error

My company changed the payroll frequency on 5-1-20 from semi-monthly to bi-weekly. Based on the current schedule it appears there will only be 25 paychecks in 2020. I understand that regardless of the pay period count QB will automatically calculate payment based on the salary rate (all of our employees are salaried). But when I project the salaries paid by year end it doesn't appear to me that employees will be paid their full salary. I'm wondering if there is a problem with how the new payroll schedule was setup. The new schedule starting in May was setup with a period end date of 5-14-20, paycheck date 5-14-20. For example, an employee making $60K per year was paid $2,500 per paycheck through 4-30-20. Beginning 5-1-20 their semi-monthly paychecks are in the amount of $2,307.69. If my calculations are correct when they receive their final paycheck at year end 2020 the total paid will be $59,230.73 (not $60K). I hope this makes sense. What am I missing? I want to make sure our employees are paid correctly. Thank you.

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Best answer October 30, 2020

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Highlighted
QuickBooks Team

Payroll frequency change and possible schedule error

Not to worry, I've got you all the steps you need to fix the difference, @ControlsAdmin.

 

With semi-monthly pay periods, you pay employees twice a month, but with bi-weekly, you pay employees every two weeks. As a result, with a semi-monthly schedule, employees receive 24 paychecks per year, but with bi-weekly, they receive 26.

 

When changing from semi-monthly to a bi-weekly schedule for salaried employees, QuickBooks automatically divide the annual salary by 26 pay periods. This tendency would result in a difference between the expected annual and actual salary. 

 

To fix this, we'll have to adjust employee salary for the remaining pay periods. To do the math, since you have a difference of $769.27 (60,000-59230.73), you'll have to divide it by the remaining pay periods, 4 for example, to get the adjustment that you need to add to your employee's paycheck, that would be 192.32 (769.27/4). 

 

Going forward, you'll have to pay your employee for the amount of 2500.01 for the remaining pay periods. To do that, we'll have to adjust employee's salary by multiplying 2500.01 by 26 pay periods (total pay periods in a bi-weekly schedule). 

 

Then, you'll have to update your employee's salary from their profile. 

  1. Go to the Employees menu and select Employee Center.
  2. Right-click on the employee's name, then choose Edit Employee.
  3. Select the Payroll Info tab, revise the employee's annual rate, 65,000.26 (2500.01*26).
    Capture.JPG
  4. Click OK.

 

Doing this will give your employee the adjusted amount (2500.01) for the remaining pay periods. This will ensure that by the end of the year, the employee will get the total amount of 60,000 annual salary.


Once done, you can check this article on how to run a report that tracks the employees' pay rate changes over a period of time: Employee Pay Adjustments History Report.

For additional reference, you can refer to the following article to prepare for year-end: Year-end Checklist.

 

Please know that I'm here anytime you have other concerns. Have a great rest of your day, 

View solution in original post

Highlighted
QuickBooks Team

Payroll frequency change and possible schedule error

I can share with you some information about running year-end payroll in QuickBooks Desktop, @ControlsAdmin.

 

Yes, you don't need to revise the payroll schedule. The IRS collects taxes based on the constructive receipt (pay date, not the pay period). If you paid an employee for working in 2020 with a paycheck dated in 2021, then that's a 2021 payroll and is not reported on 2020 payroll tax forms.

 

To learn more about the basics of payroll processing and your obligations as an employer, you may open these articles:

 

In case you need an additional guide when preparing your year-end tax forms, you can as well use this link: Year-end checklist for QuickBooks Desktop Payroll.

 

Let me know if you have any other QuickBooks or payroll questions. I'm always here to help. Have a good day!

View solution in original post

3 Comments
Highlighted
QuickBooks Team

Payroll frequency change and possible schedule error

Not to worry, I've got you all the steps you need to fix the difference, @ControlsAdmin.

 

With semi-monthly pay periods, you pay employees twice a month, but with bi-weekly, you pay employees every two weeks. As a result, with a semi-monthly schedule, employees receive 24 paychecks per year, but with bi-weekly, they receive 26.

 

When changing from semi-monthly to a bi-weekly schedule for salaried employees, QuickBooks automatically divide the annual salary by 26 pay periods. This tendency would result in a difference between the expected annual and actual salary. 

 

To fix this, we'll have to adjust employee salary for the remaining pay periods. To do the math, since you have a difference of $769.27 (60,000-59230.73), you'll have to divide it by the remaining pay periods, 4 for example, to get the adjustment that you need to add to your employee's paycheck, that would be 192.32 (769.27/4). 

 

Going forward, you'll have to pay your employee for the amount of 2500.01 for the remaining pay periods. To do that, we'll have to adjust employee's salary by multiplying 2500.01 by 26 pay periods (total pay periods in a bi-weekly schedule). 

 

Then, you'll have to update your employee's salary from their profile. 

  1. Go to the Employees menu and select Employee Center.
  2. Right-click on the employee's name, then choose Edit Employee.
  3. Select the Payroll Info tab, revise the employee's annual rate, 65,000.26 (2500.01*26).
    Capture.JPG
  4. Click OK.

 

Doing this will give your employee the adjusted amount (2500.01) for the remaining pay periods. This will ensure that by the end of the year, the employee will get the total amount of 60,000 annual salary.


Once done, you can check this article on how to run a report that tracks the employees' pay rate changes over a period of time: Employee Pay Adjustments History Report.

For additional reference, you can refer to the following article to prepare for year-end: Year-end Checklist.

 

Please know that I'm here anytime you have other concerns. Have a great rest of your day, 

View solution in original post

Highlighted
Level 1

Payroll frequency change and possible schedule error

That makes sense. I have one final question about the payroll schedule dates. Currently the schedule lists a future pay date of 12/24/20 with a week ending date of 12/24/20. Is this okay or do we need to revise the  period end dates for the remainder of the year? Not sure if the dates really matter. Thanks for your help.

Highlighted
QuickBooks Team

Payroll frequency change and possible schedule error

I can share with you some information about running year-end payroll in QuickBooks Desktop, @ControlsAdmin.

 

Yes, you don't need to revise the payroll schedule. The IRS collects taxes based on the constructive receipt (pay date, not the pay period). If you paid an employee for working in 2020 with a paycheck dated in 2021, then that's a 2021 payroll and is not reported on 2020 payroll tax forms.

 

To learn more about the basics of payroll processing and your obligations as an employer, you may open these articles:

 

In case you need an additional guide when preparing your year-end tax forms, you can as well use this link: Year-end checklist for QuickBooks Desktop Payroll.

 

Let me know if you have any other QuickBooks or payroll questions. I'm always here to help. Have a good day!

View solution in original post

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