QuickBooks Tip – Employees With Multiple Rates of Pay

Published June 23, 2010 | By Nancy Smyth

A customer called with the following question:

We have 25 employees on the payroll at all times – more in the summer when things are busier. My employees can earn multiple rates of pay in one week (sometimes even in the same day) on the same or multiple jobs. How do I handle this in QuickBooks without always having to manually change the pay rate when I create their paychecks? To be more specific, let’s talk about “Joe”. Joe can work as:

a laborer making $12.00 per hour
a dozer trax operator making $17.00 per hour
a skid steer operator making $18.00 per hour
a supervisor making $25.00 per hour

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Answer:

This is indeed a complex situation, as well as a very common one, and having to manually change the rate of pay accordingly when creating the paycheck is highly error prone.

To successfully handle this task:

Create new hourly payroll wage items in QuickBooks called Laborer, Dozer, Skid, and Supervisor – which represent each of the different Work Classifications that your employees are paid under.
Edit Joe’s employee record, go to the Payroll & Compensation tab, add these new payroll wage items to his Earnings section by clicking into the Item column and selecting the newly created payroll items and assign the correct rate of pay.
While you are in the Payroll & Compensation tab, make sure that the option to “Use time data to create paychecks” is checked.
Enter Joe’s hours using the Weekly Timsheet function, splitting out and assigning how many hours he work on each job during the week and selecting the appropriate Payroll Item for the task.
When you create Joe’s paycheck, QuickBooks will automatically pull in the correct rate that you assigned to each Payroll Item in Joe’s employee record.

Setting up QuickBooks in this manner makes the program work for you, instead of you having to always remember to manually make the pay rate changes.

Benefits include:

A clearly visible audit trail for Worker’s Compensation Audits, as these Payroll Items now correspond to employee work classifications.
Accurate pay checks.
Less stress.

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Author’s Note:

Having to manually create new payroll items AND then update 25 employee records with new payroll wage items and rates of pay is a time-consuming process as you have to do each payroll item and employee one at a time.