Banked Hours Accrual and Vacation Hour Accrual

Question

Good morning,I'm learning Quickbooks right now, so please be patient. I am taking over someone else's position, so I was just kind of thrown in. My employer would like a way to accrue and pay out banked hours in Quickbooks, not the spreadsheet we are currently using. And then we would like to do the same thing with Vacation pay. Is there a way to do this? Can I do both on the same file? Any advice is appreciated. Thanks Shannon

Rochelley · Answer

Hi @Shannon83 ,

I believe I can help you with this. Regarding banked overtime, I made a post awhile ago about this for someone who was asking about banking overtime in QBO. However, the process is exactly the same in QB Desktop. If you have questions after reading through the post, feel free to reach out to me for any clarification you may need.

https://quickbooks.intuit.com/learn-support/en-ca/employees-payroll/is-it-possible-to-bank-overtime/01/283782#M315

I believe your question about accruing Vacation is regarding accruing Vacation Hours. Unfortunately, QBD does not accrue vacation hours, only $. I still keep a spreadsheet outside of QBD to get a handle on how many "equivalent" hours people have as it relates to the $ they have accrued. If you have your payroll items set up to accrue vacation, then the vacation accrual accumulated, less any vacation paid out will be the Vac $ Avail balance showing on each paystub. Vacation pay is a monster and and many people have trouble with it, complicated by each province having its own laws regarding it.

For example, in my province, people are entitled to 120 number of hours (3 weeks) per year with under 10 years of service. But they are also entitled to 5.769% of all their regular and overtime earnings as vacation pay. What that results in is a higher amount of vacation $ available than time entitlement.

The way it is supposed to work in our province is that employees are not supposed to be able to take vacation for a full year (or until Dec 31 if you want everyone to have a common anniversary date). Then, what they have accrued in $ as of Dec 31 of any given year, they are entitled to be paid as they take as their vacation entitlement days in the following year. Technically, if an employee worked no overtime (maybe such as a salaried employee), the amount they are paid for the vacation they take is identical to their regular wages. But if an employee works a lot of overtime, then they are entitled to be paid the % of that overtime, but still only are entitled to the same number of days.

Example:

Joe's regular hourly rate is $30.00 / hr.

Joe works 2080 regular hours in the 2020. His regular annual wages are $62,400.00.

When Joe takes his 3 weeks of vacation in 2021 that he accrued in the 2020, he will be paid $30.00 / hr for each hr of vacation he takes. Broken down hourly, the calculation would be as follows: 3 weeks = 120 hours x $30.00 / hr = $3,600.00 vacation pay in 2021. You could also come to the same conclusion if you did the following calculation: $62,400 / 52 weeks = $1,200 / wk x 3 weeks vacation = $3,600.00.

Vacation scenario with overtime:

Joes' regular hourly rate is $30.00 / hr. His OT rate is $45.00 / hr (assuming OT is paid out at time and one half).

Joe works his regular 2080 hours in 2020. But he also worked 300 hours of overtime. Joe's annual salary in 2020 ends up being $75,900.00. Now Joe is entitled to be paid $4,378.67 for vacation pay in 2021. But he still is only entitled to 120 hours. That means when Joe is paid his hourly vacation rate in 2021, he must be paid at a rate of $36.4889 / hr instead of $30.00 per hour.

In my province, this is how it is supposed to work, and I assume many other provinces will be much the same with slight variances.

However, the employer I work for does not require people to wait a year or to the end of the year to take vacation, and if they have $ in their vacation accrual, then they can take the equivalent time if they want to. The end result is, because of the amount of overtime our employees put in, they end up being able to take 4 - 6 weeks of vacation a year, instead of 3. Our director doesn't have a problem with that, as long as production continues seamlessly, which it mostly does. He wants to keep employees happy and this extra time off does keep them happy.

On the downside, there are many employees using their vacation a day here and there, an hour here and there, and they're using it as fast as they earn it, meaning they have next to no balance in their vacation $ accrual at any given time; in fact, the vacation they are taking now is actually supposed to be next year's vacation, according to the legislation. Our legislation is in place to protect employee's from themselves in a sense, so that they will actually get a mental and physical health break from working. The people that use their vacation this way, unfortunately never get to experience that. But they are all adults and can choose to not miss so much work that they are taking vacation pay for, or suck it up and acknowledge that they are whittling their vacation away little by little.

There are a few that save it up, don't take vacation for a year, and then use it the following year like they're supposed to. It also means that I am paying out all vacation at their regular hourly rates. This all leaves me with a dog's breakfast with which I have no choice other than to track both hours and $ in a spreadsheet, so when someone makes a time-off request, I know how much time they can actually take based upon the $ available, when being paid at their regular hourly rate.

That was probably waaaaaay more than you wanted to know. In the meantime, I saw your second post about wanting to bank any OT over 37.5 hours. Unfortunately, there is no automatic way to track bank time in QBD or QBO. It needs to be entered at the timesheet level or in the employee's payroll profile each pay period. I find it easier to deal with a the timesheet level.

Are you currently entering each employee's time into a timesheet that then transfers to the paycheques? Also, does your province require you to bank time at the overtime rate? For example, in my province if an employee wants to bank his overtime and we agree to let him, then it must be banked at the same OT rate as he would have been paid, e.g. time and a half. If the employee works 1 hour overtime, he must be either paid at 1.5 times his hourly rate, or if he banks the time, then he gets to bank 1.5 hours, to be paid at a later time, at his regular rate. In the end, he is still paid the same amount of money for that one hour of overtime.

Depending on whether you must bank time at the OT rate will determine how you would set up your payroll items and entered on the time cards. I also have a kick-a$$ spreadsheet that I've been tweaking for a few years and it is a pretty simple matter for me to update all the vacation time and bank hours, as well as vacation $. It just serves as a check and a balance to ensure that the correct info is being entered into QB. Let me know if you need more help.

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