Background

This article will explain how to set up the vacation pay wage through which an employee and the accrual to track the time. This should be done whether you are accruing hours and holding them for employees to use or just adding the vacation pay to every pay cheque.

The Vacation Accrual (Expense) categories are linked to the Vacation Pay - Accrual Paid Out wage category. The accrual, expense categories accrue the entitlement, which is paid out with the Accrual Paid Out wage category.

You need to have both the accrual (expense) and the wage categories set up and associated with the employee.

Check the Payroll Setup page for additional information.

Setting up the Wage

1. Go to Lists form the menu bar at the top opf the screen.
2. Choose Payroll Categories > Wages from the drop down menu.
3. Click the New button.
4. Type in the Wage Name you would like (normally something like Vacation Pay).
5. Set the Type of Wage as hourly.
6. If Vacation pay is going to be the same as the normal rate you pay employees you can set the Pay Rate to be the Regular Rate multiplied by: 1.0000.
7. If you want to Override the linked wage expense account place a check in the box and choose the expense account you would like.
8. If the vacation pay is going to be paid out every pay period make sure you DO NOT check "Automatically Adjust Base Hourly or Base Salary Details." If, on the other hand, you wanted to pay a vacation leave pay in lieu of regular pay, you would select this option.
9. Click on the Employee button at the bottom left.
10. Place a ticket mark to next any employees you want this to apply to.

Setting up the Accrual

1. Go to Lists from the menu bar at the top of the screen.
2. Choose Payroll Categories > Expenses from the drop down menu.
3. Click the New button at the bottom left.
4. Type in the Accrual Expense Name you would like.
5. Link the Expense account you would like to link this to.
6. Link the Payable liability you would like to link this to.
7. Type of expense should be set to Accrual.
8. The Expense Basis should Equal a percentage of a regular wage category.
   • Note: If more than one wage category applies to employees, or if employees have several different wage categories, the accrual should be based on the Gross, Federal or Provincial wage category. When the accrual is based on a category other than a single wage category, you should Exclude the Vacation Pay - Accrual Paid Out category from the accrual. This is done by clicking the Tax Exempt button and placing a tick on the linked wage line in the Exempt window This will prevent the accrual from accruing on the paid out amount.
9. Selected the linked wage category you would to pay the accrual out from.
10. Click on the Employee button in the bottom left corner of the expense.
11. Place a tick mark next to any employees you want this to apply to.

Paying

If using timesheets, the Accrual Paid Out wage will appear as a line item; you could indicate the Paid Out hours on the timesheet. Whether you are using timesheets or not, the Accrual Paid Out wage will appear on the employee's stub.

In the Select and Edit Paycheque window, verify the line item exists, and enter the hours required (if desired), if not already entered. In any case, verify (or enter) the dollar amount you are paying out. This value should match the Vacation Pay - Accrued expense amount. Continue processing payroll.

Paying the employee with the Paid Out wage category, will consume the time accrued into this category by the 4% or 6% Vacation Accrual category.

Accounting

The Accruals are expensed when they are accrued. The both the employer and employee CPP and EI taxes are withheld when the accruals are paid out.