Payroll error-wrong pay rate

may_pearlpt · ‎October 16, 2020

I was hoping someone would be able to help me out. I am new to QB and I recently added a new employee in the employee tab. I didn't notice that the pay rate had automatically defaulted to $11.50 and I need to change it to the employee's actual pay rate. However, I just noticed it and I have already ran one payroll for them.

I've already updated their pay rate for the next payroll but...

How do I give them the difference of their pay from last paycheck? Will this affect the taxes, etc?

Please let me know a step by step guide to correct this error. I appreciate all your time and effort!

RaymondJayO · ‎October 16, 2020

Welcome to the Community, @may_pearlpt.

Yes, I'm here to help you with correcting this error. It's good to hear that you've already updated your employee's pay rate for the next payroll.

Giving the employee the difference of their pay from the last paycheck will depend if the employee was overpaid or underpaid. Also, the tax tracking type you've used will matter on how this affects your taxes.

If the employee has been overpaid from the last paycheck using the previous rate ($11.50), let's first set up a deduction item. This way, you can add it to the next payroll. Here's how:

Go to Lists from the top menu and select Payroll Item List.
Select the Payroll Item button and click New.
Choose Custom Setup and click Next.
Select Deduction and click Next.
Enter the name of the payroll item and click Next.
In the liability account field, enter the same expense account that was used for the original compensation item with which the employee was overpaid.
Select Compensation as the tax tracking type. If you choose None, this won't affect taxes as it is being deducted from the net pay. Click Next.
Select Calculate this item based on Quantity if the employee was paid hourly. Choose Neither if the employee was paid with a salary item.
Click Finish.

Then, add the new deduction item to the next paycheck for the overpaid employee. Then, enter the overpayment amount, hours, and click Save. For detailed instructions, check out this article: Reduce Wages.

If the employee has been underpaid from the last paycheck using the previous rate, set up an "addition" payroll item type instead. This way, you can add the difference to the next payroll.

Once resolved, I recommend running and customizing any payroll reports in the program. Doing this will help you manage your payroll and keep track of employee expenses.

Click the Reply button below if you have follow-up payroll concerns or other inquiries. I'll gladly help. Keep safe.

View solution in original post

RaymondJayO · ‎October 16, 2020

Welcome to the Community, @may_pearlpt.

Yes, I'm here to help you with correcting this error. It's good to hear that you've already updated your employee's pay rate for the next payroll.

Giving the employee the difference of their pay from the last paycheck will depend if the employee was overpaid or underpaid. Also, the tax tracking type you've used will matter on how this affects your taxes.

If the employee has been overpaid from the last paycheck using the previous rate ($11.50), let's first set up a deduction item. This way, you can add it to the next payroll. Here's how:

Go to Lists from the top menu and select Payroll Item List.
Select the Payroll Item button and click New.
Choose Custom Setup and click Next.
Select Deduction and click Next.
Enter the name of the payroll item and click Next.
In the liability account field, enter the same expense account that was used for the original compensation item with which the employee was overpaid.
Select Compensation as the tax tracking type. If you choose None, this won't affect taxes as it is being deducted from the net pay. Click Next.
Select Calculate this item based on Quantity if the employee was paid hourly. Choose Neither if the employee was paid with a salary item.
Click Finish.

Then, add the new deduction item to the next paycheck for the overpaid employee. Then, enter the overpayment amount, hours, and click Save. For detailed instructions, check out this article: Reduce Wages.

If the employee has been underpaid from the last paycheck using the previous rate, set up an "addition" payroll item type instead. This way, you can add the difference to the next payroll.

Once resolved, I recommend running and customizing any payroll reports in the program. Doing this will help you manage your payroll and keep track of employee expenses.

Click the Reply button below if you have follow-up payroll concerns or other inquiries. I'll gladly help. Keep safe.

natbohman · ‎July 21, 2021

You mentioned - If the employee has been underpaid from the last paycheck using the previous rate, set up an "addition" payroll item type instead. This way, you can add the difference to the next payroll.

Any suggestion on what we would label this "addition"?

Would the account for tracking this expense be "Payroll Expenses"

Would the tax tracking type be "compensation"?

Which would we choose under "Calculate based on quantity"?

And with the default rate and limit, I guess I can tailor this for each employee at the rate they were underpaid and it would be the lump amount entered here and not hours and hourly rate?

Example: I underpaid an employee for 30 hours by 50 cents, should I enter $16.00 in this field and then change it for every employee?

I apologize but I am very new to Quickbooks and while this program does everything plus some, it confuses the heck out of me. I'm a small business owner and recently took on enhanced payroll to save money but not sure I made the right decision.

Thanks

BettyJaneB · ‎July 22, 2021

Thanks for allowing QuickBooks to help you with your accounting needs, @natbohman.

I'm here to guide you on how you can pay the underpayment that you have for your employees.

As mentioned by my peer above, you'll need to set up an addition type of payroll item. This way, you can use it in running an unscheduled payroll to cover the unpaid amounts for your employees afterward.

To create a payroll item:

Go to Lists from the top menu and select Payroll Item List.
Select the Payroll Item button and click New.
Choose Custom Setup and click Next.
Select Addition and click Next.
Enter your desired name of the payroll item and click Next.
In the liability account field, enter the same payroll expense account that was used for the original compensation item with which the employee was paid.
In the Calculate based on quantity window, choose Neither and select Next.
If the employees do not have a default rate and limit but do have the same rates and limits, enter the amounts.
Select Finish.

Once done, you can now run an unscheduled paycheck for all the employees that was underpaid. In this case, use the item that you made.

To do that:

Click on Employees.
Choose Payroll Center.
Click on Start Unscheduled Payroll.
Set the Pay Period Ends and Check Date fields.
Choose the employee that was underpaid.
Select the Handwrite & Assign check numbers radio and enter the number.
Click on Open Paycheck Detail.
Enter the amount in the Check Amount field.
Click on Save & Close.

Moving forward, make sure that the employee's hourly rate setup is now correct. This way, you can prevent underpayment.

You can refer to this article for more insights about generating an Unscheduled Payroll: Learn how to create paychecks to pay your employees.

I'm also sharing these recourses with you to guide you in ensuring the accuracy of your employee's YTD transactions:

Never hesitate to get back to me if you need further assistance while working with payroll. It's always my pleasure to help. Keep safe!

natbohman · ‎July 29, 2021

Betty Jane:

Thank you for the quick and detailed response. I was able to follow the step-by-step process you provided and accomplish what I needed to get done. You could not have made the process any easier. Again, thank you!

BettyJaneB · ‎July 29, 2021

You're welcome, @natbohman.

It's my honor and pleasure to assist you with managing your paychecks. I'm so happy knowing that you're all set now.

Remember that my doors are always open to help if you need anything with QuickBooks. I'll make sure you're taken care of.

Wishing you and your business continued success!

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Payroll error-wrong pay rate