Set Up Vacation Pay, Deductions and Garnishments

Let’s start with vacation pay. If you offer vacation time to your employees, follow these steps. First, you’ll need to edit your employee’s information to add “vacation pay” as a pay type. To do this from the Home screen, click on the Employees tab on the far left.

On the employee menu click on the Name of the employee you want to edit.

On the employee detail menu, click on Edit employee.

On the “Edit employee details” screen, underneath section 3 “How much do you pay your employee?” click on the pencil icon beside the “Add Additional pay types” option.

Click the box next to the additional pay type you want to add for your employee. For example, we’ll check the box beside Vacation Pay. When you click on the box next to the Additional pay type you’ve selected, a small sub-menu of options will appear.

Next, enter the details for your employee’s vacation pay. In the “Hours are accrued” drop-down menu, select the interval for when your employee will accrue vacation time. For example, let’s select the each pay periodoption so that the employee will accrue vacation time each pay period.

Next enter how many vacation hours your employee earns per year.

Now enter the Maximum allowed hours your employee can accrue per year, then click OK when you’re finished.

Finally, you’ll need to enter the current balance (in hours) of vacation pay that your employee has accrued at the time. Once you’ve entered the current balance, click Done in the bottom right of the screen to proceed.

Back on the main Employees screen, click Run payroll.

Now when you pay employees, you’ll see a column where you can enter the number of hours your employee used of their vacation pay.

Reports make it easy to answer your employee’s questions, like “How many vacation hours have I used, and more importantly, how much do I have left?” You can find answers to your employee’s question using Reports. To do this from the main Employees page, click on the Reports tab in the far left to navigate to the Reports menu.

On the Reports menu page, type “vac” into the text box and select Vacation and Sick Leave from the drop-down menu suggestions.

Now on your employee’s Vacation and Sick Leave report you can see specific details to answer questions about how many vacation your employee has accrued.

Next up, let’s set up a deduction. You can set up and track deductions for things like health care insurance and retirement plans. To do this, from the Employees menu, first click on the employee’s Name.

Let’s set up a deduction for medical insurance in our example. On the “Edit employee details” screen underneath section 4 “Does your employee have any deductions?” click on the pencil icon beside “No (most common).”

On the next page, underneath “Deduction/contribution type” select Health Insurance from the drop-down menu options available.

Now, beneath “Type” select Medical Insurance from the drop-down menu options available.

Enter the name of the Provider (e.g. Blue Cross Blue Shield) into the box labeled “Provider (appears on paycheck)”. Then, in the “Employee deduction” sub-section, type the dollar amount you want to deduct from each of your employee’s checks into the text box marked “$.”

Lastly, you need to enter whether your insurance premiums are deducted before or after taxes by selecting an answer using one of the radio button at the bottom of the screen. Click OK in the bottom right corner when you’re finished.

Did you notice the sample check for your employee? Based on the info you entered, QuickBooks gives you a preview of how the deduction you’ve added affects your employee’s net pay.

Now let’s set up a garnishment. When setting up a garnishment, you’ll need to get the details from the garnishment order that you received for the employee. For example, if the garnishment is a child or spousal support order, it will include the total amount to garnish per pay period and the maximum percent of the employee’s disposable income, or net paycheck, that can be garnished. To get started setting up a garnishment, from the “Edit employee details” page click Add a new deduction in Section 4 underneath the last deduction you entered.

On the “What deductions or contributions does your employee have?” page, select Garnishment from the drop-down menu options available.

Next, choose Child/Spousal Support from the drop-down menu options available beneath “Garnishment Type.”

Enter a Description (appears on paycheck) for the garnishment, then type in the Amount Requested and enter the Maximum percent of disposable income as described on the garnishment order that you received for the employee. Click OK in the bottom right corner when you’re finished.

Did you notice the changes to your sample check for your employee? Based on the garnishment info you’ve entered, QuickBooks updates your preview of how the deductions you’ve added will affect your employee’s net pay.

And that’s it! Now it’s your turn — set up vacation time, deductions and garnishments for your employees. And remember if you get stuck or aren’t sure what to do next, we’re always here to help.