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Hourly to Salary Conversion Due to Promotion

Forum|Forum|5 years ago
August 27, 2020
2 replies
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What would be the best way to handle a person that was an hourly employee before promotion that after promotion will be converted to a salary person?

Thoughts:

(1) Can these two types appear on one payroll cycle? If not, then I assume I would have to run an unscheduled payroll for pre-promotion, then an adjusted payroll prorated at salary post promotion.

What I have seen previous practice was to create a different spelling of the person, but I know this will cause an issue with W2s at YE. So, I know that is not ideal.

This is what I'm currently thinking. Run an unscheduled payroll at the hourly rate. Process. Then go to the employee profile change settings to salary and continue payroll from thereon at the salary prorated rate.

Bonus Related Question:

Also, is it possible to merge duplicate employees one was configured to hourly rate and one was configured at salary rate? Example: John Merry Doe (Employee ID 1001) J. Merry Doe (Employee ID 1002).

Best answer by BigRedConsulting

@User_20200731

RE: 1) Can these two types appear on one payroll cycle?

Yes. That is easy to do.

RE: What I have seen previous practice was to create a different spelling of the person, but I know this will cause an issue with W2s at YE.

It causes many more issues than that, in several cases. This is not a good idea.

RE: is it possible to merge duplicate employees one was configured to hourly rate and one was configured at salary rate?

No, it is not possible to merge two employees when they have both been paid. You can merge an employee who has no payroll into another that does.

Here's what do to:

If the employee's promotion is effective mid-pay-period, then for the paycheck for that period:

1 - As you're creating payroll click the employee's name to open the paycheck preview.

2 - Pay the employee for their hourly hours as normal, for the part of the period they were hourly.

3 - Add the salary item you want to use to the earnings table. For the pro-rated salary amount, manually calculate the salary/day based on the period salary. For example, if you pay every other week and the salary for that period is $2000, then the daily salary is calculated like: $2000/10 days work or $200 per day. If the employee worked 4 days of the period on salary, then the salary amount is $800.

4 - Complete the payroll as normal.

Then:

5 - Edit the employee, and then remove the hourly items and add the salary item, entering the annual salary there (using the example above, enter $52,000.)

6 - On your next payroll, make sure the paycheck includes only the salary (some settings might make QB pull in the prior paycheck's earnings table details.)

C

CharleneMaeF

Thanks for sharing what you'd like to achieve, @User_20200731.

We're unable to use hourly and salary rates in one payroll cycle. Though, we can create an item manually and add it to the employee's paycheck.

Here's how:

Go to Lists and then select the Payroll Item List tab.
Select Payroll Item and then select New.
Click Custom Setup, then select Next.
Select Wage and then select Next.
Choose Hourly Wage.
Select the appropriate pay type.
Note: For holiday pay or other types not specifically listed, choose Regular Pay.
Then click Next.
Enter a name for the pay item and then click Next.
Choose the Expense account where you want to track wages.
Select Finish.

Then, we can now add the item to the paycheck. I'll guide you how:

From the Employees menu, select Payroll Center.
Click Start Unscheduled payroll.
Select the name of the employee.
Select Continue on the prompt message.
Then click on Continue.
Select Open Paycheck Detail.
On the Item Name field, select the item you've created.
Review the items and then click Save & Close.
Click Create Paychecks.

Once done, let's change the rate of your employee to salary. Moving forward, this rate will show on your employee's info.

From the Employees menu, select Employee Center.
Double click the name of the employee.
On the payroll info tab, select Salary.
Once done, click on OK.

Also, to merge duplicate employees, you can make it identical to the one you're merging it with and click OK. Then select Yes to confirm.

Additionally, I've included an article that'll guide you in viewing what you've paid out. This way, you'll keep track of your payroll totals: Create a payroll summary report.

We're always here to help if you have other payroll concerns. Have a great day!

U

User_20200731Author

What happens if an employee voluntarily transfers from salary to hourly what would the process be to convert in that direction also, and avoid creating a duplicate employee profile?

MariaSoledadG

The employer must be informed if an employee wants to be paid on an hourly rate, User_20200731.

You'll just have to edit the employee's earning information to change from salary to hourly and to avoid duplicate employee's profile.

Here's how:

Go to Employees, then select Employee Center.
Double-click on the employee's name.
Select the Payroll Info tab.
Click on the blank area, in the Earnings box, below Item Name column.
Select the drop-down arrow, then select your Hourly item.
In the Hourly/Annual Rate column, enter the employee's hourly rate.
Click OK.

In case you'll want to customize your payroll reports, here's an article for your reference: Customize Payroll And Employee Reports.

Drop a reply below if you need further assistance. I'll be here to help.

BigRedConsultingAnswer

@User_20200731

RE: 1) Can these two types appear on one payroll cycle?

Yes. That is easy to do.

RE: What I have seen previous practice was to create a different spelling of the person, but I know this will cause an issue with W2s at YE.

It causes many more issues than that, in several cases. This is not a good idea.

RE: is it possible to merge duplicate employees one was configured to hourly rate and one was configured at salary rate?

No, it is not possible to merge two employees when they have both been paid. You can merge an employee who has no payroll into another that does.

Here's what do to:

If the employee's promotion is effective mid-pay-period, then for the paycheck for that period:

1 - As you're creating payroll click the employee's name to open the paycheck preview.

2 - Pay the employee for their hourly hours as normal, for the part of the period they were hourly.

3 - Add the salary item you want to use to the earnings table. For the pro-rated salary amount, manually calculate the salary/day based on the period salary. For example, if you pay every other week and the salary for that period is $2000, then the daily salary is calculated like: $2000/10 days work or $200 per day. If the employee worked 4 days of the period on salary, then the salary amount is $800.

4 - Complete the payroll as normal.

Then:

5 - Edit the employee, and then remove the hourly items and add the salary item, entering the annual salary there (using the example above, enter $52,000.)

6 - On your next payroll, make sure the paycheck includes only the salary (some settings might make QB pull in the prior paycheck's earnings table details.)

U

User_20200731Author

What would be the best way to go about correct two employee profiles, after payment has been has been issued? These two employee profiles are for the same employee but payment has been issued and this spans over several months. @BigRedConsulting

BigRedConsulting

This is a hard case for a few reasons:

1. You can't change the employee name on an existing paycheck.

2. You can't merge two employees that have both been paid.

3. The taxes on the paychecks may have over-run the annual limits, since they're split between two employees.

Here's what I'd do, very carefully:

In the end, you'll keep the employee that has a lot of data, and work to remove the new one incorrectly set up, which has only a few months of data.

One paycheck check at a time, starting with the oldest paycheck for the new unwanted employee, create a new paycheck for the old employee that is a duplicate:

- Make sure all the payroll items and amounts - from Gross to Net - are exactly the same on the new check as on the existing check, even if you have to overwrite the amounts manually. Technically, you don't need to do this for the company paid taxes and other company paid items, as they don't contribute to the check amount, but you can do so.

- Double check that all the amounts are the same using payroll reports for the period you're duplicating the checks. The main "Payroll Summary" report will be useful in this case. You can filter it for one day, and/or for the entire period in question.

- Once you're sure the new paychecks mirror the existing ones, then carefully delete the paychecks for the unwanted employee.

- Then delete that employee from the employee center.

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