Employees and payroll

Thanks for getting back to us about this payroll issue, @Kate M,

Handling a salary reduction in QuickBooks Desktop is quite tricky. If you need to update the employee's salary for a certain period, it requires updating the annual amount on the employees profile so it shows the correct amount.

Say for example, an employee gets $120,000 as his annual salary, then he should have $10,000 every month. To reduce this by a dollar amount every payroll run, change the annual rate to $119,988 (actual rate minus 12 months), so when you process the paycheck, it shows $9,999. After the reduction period no longer takes effect, restore the original rate so the taxes are accurate.

There is no need for you to set up another payroll item for the reduction, QuickBooks will automatically calculate the taxes based on the new gross wage on the paycheck. You only use deduction items if you made an overpayment to an employee. This article best explains this scenario: Reduce paycheck wages for an employee who has been overpaid

For your reference on how to edit an employees profile, see the following article: Update or delete employee info

Let me know if you have any questions or clarifications about this. I'll be more than glad to share some more insights to help you with your payroll processing. Just click the Reply button below to notify me.