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Set up and track time off in payroll

SOLVED•by QuickBooks•495•Updated June 30, 2023

Learn how to set up and track time off, vacation, and sick pay for your employees.

With QuickBooks Online Payroll and QuickBooks Desktop Payroll, you can set up and track the time your employees take. First, you’ll set up time-off policies like paid or unpaid time off, sick pay, and vacation pay. If you need to, you can add time off at any point if someone needs more.

Note: If your account integrates with QuickBooks Time, you can set up your time off policies there to match what you set up in your payroll account. You and your team members can track time off using QuickBooks Time, which will sync back to payroll.

How to set up time off in payroll

Before any of your employees can take time off, you first need to set up a time off policy. Set up vacation or sick pay with these steps for your version of payroll.

Note: Not sure which payroll service you have? Here's how to find your payroll service.
  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Pay types, select Start or Edit.
  4. Scroll down to the Time off policies section. From the Paid time off, Unpaid time off, Sick Pay, or Vacation Pay ▼ dropdown, select Add new [time off pay] policy.
  5. Complete the on-screen fields to create your policy, then select Save.
  6. When finished, select Save.
  1. Select Lists, then Payroll Item List.
  2. Select Payroll Item ▼ dropdown, then New.
  3. Select Custom Setup, then Next.
  4. Select Wage, then Next.
  5. Select Annual Salary or Hourly Wages, then Next.
  6. Select Sick or Vacation Pay, then Next.
  7. Enter a name for the item, then Next. Note: If you use time off you can rename this item to TO.
  8. Choose the expense account you want for the item, then Finish.

How to change your time off policy

Need to update your existing policy? Be sure to update your payroll.

Edit your policy with:

  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Pay types, select Start or Edit.
  4. Scroll down to the Time off policies section. Select Edit ✎ next to the policy to make changes.
  5. Edit the policy, then select Save.
  6. When finished, select Save.
  1. Select Edit, then Preferences.
  2. Select Payroll & Employees then go to the Company Preferences tab.
  3. Select Sick and Vacation.
  4. Fill in the defaults you want to set up. Note: Make sure to check the Do not accrue boxes at the bottom if you don't want time accrued when paying sick/vacation/overtime.

How to add paid or unpaid time off

Need to give an employee more time off? Here's how to add more time.

  1. Go to Payroll, then Employees.
  2. Select your employee.
  3. From Pay types, select Start or Edit.
  4. Scroll down to the Time off policies section. Next to the Paid time off or Unpaid time off, enter the current balance. Or if you want to change the policy, select Edit ✎ then choose how the hours are accrued, Hours per [time period] worked, and Maximum allowed  (optional), then select Save.
  5. When finished, select Save.
  1. Select Employees, then Employee Center.
  2. Select the employee name.
  3. Select Payroll Info, then select Sick/Vacation.
  4. Enter the number of hours that are currently available for the employee in the Hours available as of mm/dd/yyyy field. Note: This is the total amount of hours available as of the date you add sick or vacation to the employee profile.
  5. Select the Accrual period ▼ dropdown menu and choose one of the three accrual periods for sick time listed above.
  6. In the Hours Accrued field, enter the number of hours that will be accrued (based on your selection in step 4).
  7. (Optional) In the Maximum number of hours field, enter the maximum balance of sick hours that the employee can have.
  8. If you do not allow hours to roll over to the next year, select “Reset hours each new year?”.
  9. Enter the start date of the accrual year.
    1. Note: Use January 1 for calendar year or hire date if accrual happens on an employee's anniversary date.
  10. Enter the date that sick time should begin accruing.
  11. To specify accrual information for vacation hours, repeat steps 4 through 10 for the Vacation section of the window.
  12. Select OK to record your changes.

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