Vacation Time (PTO) - Reducing Balance When Running Payroll

Thanks for posting your question here, @wsenti0. 

Before going into detail, I want to ask if your meaning your vacation isn't accruing on paychecks correctly?

If so, you can check the employee profile and also check to ensure the  "Do not accrue sick/vacation" checkbox isn't checked. 

Here's how to check the employees' profile: 

1. Select Employees and then choose Employee Center.
2. Double-click the employee name, and in the Edit Employee window, go to the Payroll Info tab.
3. Select Sick/Vacation, then verify and adjust the following data as needed.

For more information about checking the payroll item on your QuickBooks Desktop account, you can refer back to this article: Sick and vacation time incorrect or not accruing on paychecks. 

I look forward to chatting with you soon. Have a good one!

Hi,

The vacation time is accruing (increasing with hours worked) just fine.

My question is that when we run payroll and an employee chooses to use available vacation time that our payroll items are setup properly.

It became apparent to me that we had two payroll item options in place for paying accrued vacation time

• Salary Personal Time (ignore the Salary Personal Time – G&A, it’s the same)

• Hourly – Personal Time

When selecting #1, once inputting the hours, the vacation available does not reduce by any amount, whereas when selecting #2 it does.

I was told that I needed to manually adjust the hours in the upper right corner in order to properly reflect the vacation hour balance.

We are trying to revamp our recording of vacation time to eventually actually accrue the liability in the financial statements, possibly generated automatically as opposed to tracking outside of QuickBooks and doing general journal entries.

Can you provide further insight?

Two screenshots attached.

Hi,

The vacation time is accruing (increasing with hours worked) just fine.

My question is that when we run payroll and an employee chooses to use available vacation time that our payroll items are setup properly.

It became apparent to me that we had two payroll item options in place for paying accrued vacation time

• Salary Personal Time (ignore the Salary Personal Time – G&A, it’s the same)

• Hourly – Personal Time

When selecting #1, once inputting the hours, the vacation available does not reduce by any amount, whereas when selecting #2 it does.

I was told that I needed to manually adjust the hours in the upper right corner in order to properly reflect the vacation hour balance.

We are trying to revamp our recording of vacation time to eventually actually accrue the liability in the financial statements, possibly generated automatically as opposed to tracking outside of QuickBooks and doing general journal entries.

Can you provide further insight?

Two screenshots attached.

Hi, @wsenti0. 

Welcome back to the Community. For me to better assist you, is there a particular reason that you'd like two different payroll items for vacation hours? If it's for accounting purposes, then you'll need to change the payroll settings to have it track differently for each employee. Here's how: 

1. Go to the Employees menu. 
2. Select the Employee Center. 
3. Click on the employee you'd like to make changes to. 
4. Choose Payroll Info. 

That's it! Here's an extra link that might be helpful to you in the future: set up and pay sick and vacation time. 

Remember, I'm only a comment away if you need me. Have a wonderful day! 

Hi,

I am not sure why we have two different payroll items; this is what I am looking to figure out and understand.

I am trying to understand why / how these items function differently in that when using the item noted as “hourly” I actually see the hours reduce in the upper right hand and when using the “salary” payroll item they do not.

I was told by our previous bookkeeper that in order for us to reduce the accrued vacation hours for salary employees we must manually reduce the total hours by the number of hours used, which to me does not seem to make sense.

Regardless of whether you are on salary or paid hourly, if you use your vacation time it should automatically reduce what is left to use.

Can you provide any further clarity here?

Thank you.

Hi,

I have one additional follow up question about this. If we are seeking to show the actual vacation time liability (dollar amount) on our balance sheet, could we set / connect this to the/a liability account on the chart of accounts?

We already have a chart of account item for this that we would previously manually enter through a general journal entry.

Presumably how this would work would be that we may need to manually enter a general journal entry for new vacation time earned (i.e. $ rate x hours), but then every time payroll is run with the use of any personal time it would be automatically reduced via what I noted above.

Two Questions:

• Is my first assumption correct regarding changing the connected / associated chart of account (fully knowing that if we don’t start with wherever the employee is say TODAY with their vacation time accrual dollar balance that any vacation time used it could be a negative liability on the balance sheet).

• Is there a way to automate the actual earning of vacation time into the same liability account?

Thank you.

Glad to have you back here in the Community, @wsenti0.

I've got some clarifications to share regarding your account concern for the vacation time entered in QuickBooks Desktop.

Yes, your assumption is correct. The balance will show as negative since the vacation time was used already. To show the correct figures, you may enter a journal entry for the used time in the accurate liability account.

On the other hand, to automate the actual earning of vacation in the same liability account, you'll need to edit the vacation payroll item. This way, you can select the correct liability account to be used. Doing this will connect the liability account used in the Chart of Accounts, and have the actual vacation time liability show up on the balance sheet.

To do that: 

1. Click on List at the top menu bar.
2. Hit on Payroll Item Lists.
3. Double click the vacation item name.
4. Press on Next.
5. From the Expense Account section, choose the correct liability account to be used. 
6. Tick on Finish.

Here are some resources that you can visit about changing liability account associated with a payroll item and managing payroll liabilities in QuickBooks Desktop for reference:

• Payroll Liability and/or Balance Sheet Report shows incorrect amounts for payroll liabilities
• Change an expense or liability account associated with a payroll item

If there's anything else that I can assist you with, let me know. I'll make sure you're all set. Stay safe!

Hi,

I have a more specific question that I am looking to finally resolve that I haven’t yet regarding this.

In terms of vacation time earned, which occurs every paycheck, it does not appear that the actual accrued liability is appearing.

Meaning, for example, if someone earns 4 hours of vacation time in a paycheck period (80 hours) with a salary of say $132,000 ($64.46 per hour), then they would have earned (accrued) $253.85 worth of vacation time.

We have an expense account under our chart of accounts titled “Payroll Expense – personal time” which generates a “$0” entry with each paycheck ran for each employee. I presume this is somehow supposed to generate the expense of vacation time earned (as a debit). I do not however see any “$0” entry under our accrued liability account.

In testing our vacation time used, each paycheck where vacation time is used, it is correctly subtracted from the accrued liability pool of vacation time – which is good.

Could you provide some thoughts on our setup here with solving this issue of not having the vacation time earned hit our financial statements?

I'll shed a light on this matter, wsenti0.

QuickBooks Desktop allows you to either give a lump sum at the beginning of the year or paid time off accruals (sick and vacation time) that can be used when paying employees.

Based on your screenshot, your set up is right. Please know that in QuickBooks Desktop, the accrued vacation or sick hours is a non-posting transaction. This means that even though we can view the total accrued hours when we create the paychecks, these hours won't be posted to the expense account (Payroll Expense) that you've created. We will see 0 on that account until the accrued hours are used by your employees.

This is how QuickBooks handles sick and vacation accruals, accruing these hours will not be posted on your reports or expense account. It will only show once it's used.

We'll also have to take note that Sick and Vacation hours used are based on the pay period end date of the paycheck, and not the paycheck date. In addition, Sick and Vacation hours available as of date will update to the most recent paycheck pay period end date for the employee.

I've included articles that will help you in handling sick and vacation time:

• Sick and vacation time incorrect or not accruing on paychecks
• Set a maximum for carryover sick pay

Should you have any other concerns or further questions regarding this matter, you can always find me here. Stay safe and healthy.

So, essentially the only way to properly account for vacation time earned in terms of the pay periods (not pay dates) is through general journal entries? (clearly tracked in either a spreadsheet or other means)

The payout of vacation time as of the pay date can be reduced from an accrued liability account that is also managed through  a) additions through general journal entries and b) other adjustments made manually through general journal entries, such as starting balances, etc. 

I appreciate your input.

I'm not going to give you a definitive answer, but just thinking through this, my guess is that the vac/sick accrual is based on hours.  Salary is not based on hours, therefore it isn't going to work.  For example, when a salaried employee is terminated during the middle of a payroll period, you have to calculate what his "hourly" rate is, add that as an item and make your entry in hours.   If you want the vac/sick accrual to work, you will have to set your your item name to salary, but put the type in as Hourly Wage.   When doing the entry for the payroll period you will have to deduct the PTO hours from the standard hours so that the total hours are always the same.  In short, I don't think QB is designed to track salaried vacation.  It would be easier to track it separately in Excel or set it up as hourly in QB which is more hassle than it's worth.  

I have a salary employee that took 1 day off and had no salary vacation time. How do I adjust his salary to reflect the 1 day he took off? Or how do I set up a payroll item if needed?

Hello there, @Direct1.

I'll help you adjust your employee's salary in QuickBooks Desktop.

Yes, you're right. You can set up an additional payroll item if you've already run your payroll. Thus, you can adjust the employee's salary to reflect the one day off he took and deduct it from your next payroll.

Here's how:

1. Go to the Lists and select Payroll Item List.
2. Select Payroll Item, and select New.
3. In the Select Setup Method window, select Custom Setup and click Next.
4. Click Deduction, and choose Next.
5. Enter the details needed, then tick Finish when done.

Once done, you can add the item to the employee's profile. Please see this reference for further guidance: Set up, change, or delete employee-paid payroll deductions.

Also, you can refer to this article on how to run a report that tracks the employees' pay rate changes over a period of time: Run payroll reports.

Feel free to comment below if you have additional questions about managing your employees. I'm always around to help. Stay safe, and more power to your business.