I have a question regarding Vacation Pay Accruals.
Now normal practice is to accrue vacation pay in 4%, 6% and 8% increments based on duration of employment. I was able to setup the accruals properly and the system take the gross pay and multiplies it by the specific percentage. My issue comes from when I pay employees out. Right now when I add employees vacation hours (QB Payroll Advanced w/ Wagepoint) to their pay (don't allow for $ amounts) it runs the payroll but it then accrues vacation hours on the vacation pay that is being paid out. As far as I was concerned, employees don't accrue vacation time on paid out vacation hours. Because of this it puts me in to a never ending spiral as if an employee quits or is terminated, I pay his/her vacation time out only for the system to accrue 4% on the vacation I just paid. Rinse and repeat.
Welcome to the Community. I'd be glad to share helpful information regarding vacation pay in Advanced Payroll powered by Wagepoint.
Depending on your vacation policy, QuickBooks automatically calculates accruals each time you create a pay cheque based on the number of pay periods in the year. The following table shows the hours accrued per pay period for the common number of hours earned per year:
If vacation is accrues Per hour worked the employee will then accrue 2 hours of vacation time (0.05 X 40) when the pay cheque is created for that period.
It's important I know how you set up your vacation policy on your end. I encourage you to contact our support team for further assistance with this. Here's the link you can use to contact support.
Thanks for the response.
The issue I have is when paying an employee their accrued vacation pay. Lets say 'John Smith' quits and the only thing that is owed is his Vacation Pay. His current Vacation Pay balance is $1,250.00. When I process his final pay in this example, the systems will pay him the $1,250.00 minus all the taxes and deductions but at the end of it will now accrue $50.00 to his Vacation Pay balance (4% of $1,250.00). That now means in Quickbooks my Accrual account has been overstated by $50.00 and his employee Pay Stub shows him having a balance of $50.00 that we owe him.
Take that example one step further. Now to get rid of that number I pay him out the $50.00 that was falsely calculated. Now the system has Accrued $2.00 towards his Vacation Pay Balance (4% of $50.00). This turns in to a never ending cycle.
Am I simply missing something? Is there a way to run the pay without it getting re-accrued?
Does the online version support Vacation Pay Being Accrued on Vacation Pay Payout? The desktop does, but I and several others cannot figure how to make the online version do this.
As far as calculating vacation pay on vacation pay, that is something that is probably set up in the background of QBO, where you can't access. There are some provinces which do accrue vacation pay on vacation pay. My province, SK, is one of them. So if the employees you are paying in QBO are in one of these provinces, it will likely be hard coded to calculate vacation pay on vacation pay, as that is correct for those provinces.
See below for which provinces this is true. What this means is that on any pay cheques where you are paying out vacation pay for time taken, those vacation hours being paid are treated like regular earnings and are also accruing vacation pay on that vacation pay, if that makes any sense.
You have to keep doing what you're doing until you reach $0.00 Vacation owing. That is what must be done when you are in a province where vacation pay must be paid on vacation pay. In Desktop, I just keep changing the number until the vacation accrual is at $0.00. This is the only way to pay out all the vacation pay that is owed to the employee upon termination. Granted, I know that QBO handles vacation much differently than Desktop So you would likely have to be adjusting the hours by increments until you reach $0.00.
Run the final pay cheque as per normal. Wait a day (WagePoint advised best practice). Turn off vacation pay accrual in settings (I cant remember where this setting is, but it’s in there because I’ve used it) - then with vacation pay accrual turn off, run off cycle payroll to pay out all accrued vacation on termination. Hope this helps get you there. Cheers.
So I have the same dilemna as yours just know. I tried working around and I think I find the solution. (Hopefully it works for you, too!). So after I created the final (termination) cheque for this employee, like you QBO accrued hours for her, even if I pay all amount accrued to her account. Anyways, I went to her employment profile (Payroll>Employee>Employee Name>Employee Details) Hit Edit and got to #5 (Vacation Policy portion). You would see the extra hours (or $) acrrued still after paying them their last cheque. I just zeroed both of them out. Then I run the Vacation and Sick Leave report under (Reports>Payroll>Vacation and Sick Leave) then the balance is now zeroed out.
Hope this makes sense. :)
Hello @janegdlupe ,
If you read my post above you will see that the reason you are seeing additional hours of vacation owing to an employee after you paid them out the initial accrual amount, is because you are in a province where vacation pay is accruable on vacation pay and QB Desktop and QBO automatically calculates this. This is why you must keep adding to the accrual pay-out until the $ (or in the case of QBO, hrs) come to 0. This is the only way the employee will get the correct amount of vacation pay that is owing to them. By going into the set-up and overriding the remaining amount to 0 is actually shorting the employee what is owing to them and could be cause for a complaint to your province's employment standards office.
If the initial vacation pay-out is smaller - the additional accrual on that will be negligible and it is quite likely that an employee will not notice if the extra amount is not paid out. But if the initial vacation pay-out is significant, then the additional accrual on that will also be fairly significant. But in either case, this extra accrual amount should never be "zeroed" out in the background.
Ok, thanks for correcting me there. I go back and fixed what I did and pay her the right accrued vacation hours. I did the changes after I read your post and I was like, ok I missed that and been studying in since last night. Thanks again
FYI - I've been on the line with they Payroll Support team for over an hour. They do not know how to issue a termination payroll cheque to pay the terminated employee their vacation pay owed without that cheque accruing 4% vacation payable.
There appears to be no way to do it.
I also spent 20 minutes on the phone with Service BC who confirmed that charging 4% on the 4% on the 4% etc... is wrong. They called it double-dipping though realistically it's infinite dipping.
Intuit needs to redesign Standard Payroll to allow the final paycheque to be issued without it leaving Vacation hours and Amount on the Employee record.
Also, there appears to be no way to preview how this issue is going to affect the Record of Employment.
I'm surprised that Intuit hasn't caught and rectified these issues.
Has anyone figured out how to issue a final paycheque to the employee that correctly shows their vacation hours available at zero, without going through the incorrect trial and error of inputting a fake number of hours on the cheque to use up the infinite loop of 4% on 4% on 4% etc until finally the remaining hours and amount are both zero?
I don't want to use this method because it isn't correct according to Service BC, as it overpays the employee vacation pay that isn't owed. Even if I did want to use this method, it doesn't actually work 100%. There is no way to get the hours to settle on exactly 0.
It's mindboggling how this bug could possibly exist in this product. It seems to me that the capacity to be able to provide an employee with an accurate final pay cheque and their ROE correctly filled out is crucial to any payroll system. Intuit appears to have failed to provide this ability in the Standard Payroll system.
I cannot overstate the level of disappointment and frustration that I have experienced, and continue to experience with this issue. I still have no solution.
Can anyone help?
Hi AdamGibbons71. Thanks for joining the discussion. This is a topic that's been widely discussed, and as you can see in the responses above, this can be correct based on the province you're in. If you've confirmed that this isn't the proper standard for your province, janegdlupe made a great suggestion of how to zero this out in your employee settings. If you're in need of any additional assistance zeroing this amount, please touch base again with our tech support team where an agent can remotely share your screen and walk you through it.
I also appreciate your feedback about this and I'd be happy to pass this along to the product development team for future consideration.