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JonSWR
January 2, 2021
Question

Vacation pay at current rate or accrued rate?

  • January 2, 2021
  • 1 reply
  • 0 views

Hi,

 

If a worker is supposed to accrue vacation pay at 4% of gross pay (corresponding to 2 weeks), and they later get a raise, then if you pay out at the higher wage then they will draw down the available vacation pay faster than 2 weeks.

 

Does the worker still get 2 weeks time, but just doesn't get a full 2 week's pay if they haven't accrued enough vacation pay?  Seems like workers would be annoyed by the prospect of taking vacation time without getting full pay at the current rate.

 

Thanks.

1 reply

Rebecca R
Rebecca R
January 2, 2021

Hello JonSWR,

 

It sounds like you're considering the impact of a pay raise on your employee's accrued vacation. It's important to take these things into account and I want to assure you that QuickBooks Online Payroll has considered this as well. Let me explain.

 

When an employee is on an accrued vacation policy and their salary or hourly wage increases, it's helpful to consider pro-rating their vacation dollar balance by the appropriate amount. A one time adjustment can be made in order to make sure that they still get their previously earned vacation hours when they choose to take time off at their new higher wage.

 

To make this adjustment, please follow the steps below:

 

  1. Navigate to the Employees tab of the Payroll menu.
  2. Locate the employee in question and select them. 
  3. Find Step 5 in their employee profile and choose to Make Adjustments.
  4. Enter the amount of the adjustment under Add/remove balance by.
  5. Enter the desired rate to record the transaction.
  6. Hit Save.

 

There is a fantastic example of this illustrated in our Vacation accrual FAQ under the header What happens when an employee gets a salary increase? Please check out the article to learn more.

 

I hope you have a fantastic day!

 

 

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