This QuickBooks payroll tip discusses underpaying employee wages and wage restitution, after paychecks have been created and cashed.
Paying your employees the correct rate of pay is one of the most critical portions of your business; and if those employees are subject to multiple pay rate or have frequent pay rate changes, ensuring that everyone is being paid the correct rate can be a tedious and potentially error prone process.
In today’s busy workplace, business owners and payroll administrators are faced with numerous challenges which sometimes result in employee wage underpayments. Often times a wage shortage isn’t discovered until after paychecks have been created and cashed; which then requires wage restitution to the employee.
Quite often this situation puts the business owner or payroll clerk in a quandary about how to best record employee wage restitution, especially if the employees are performing work on a prevailing wage job and they must document the wage adjustment on the certified payroll reports and resubmit the reports. Clearly documenting employee wage restitution is crucial, and can be accomplished in three fairly easy steps.
3 steps to documenting employee wage restitution/payment:
- In the QuickBooks Payroll Item List, create a new Hourly Wage Payroll item and name it Wage Restitution
- Edit the records of employees who were affected by the wage underpayment, add the adjustment payroll item to the Payroll & Compensation Info tab, with the appropriate rate of pay (the difference between what they should have been paid and what they were paid)
- Issue a separate paycheck, using the QuickBooks Unscheduled Payroll option, use the adjustment payroll item and enter the number of applicable hours*
*Important Note:
The best way to document a wage restitution on a certified payroll report is to display each employee twice on the report; once displaying the rate that he (she) was originally paid and a second time displaying the hourly rate of the wage adjustment. Clearly indicate that you are submitting a corrected report by writing, in large letters, CORRECTED and highlight it using a highlighter.
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Wage underpayments can often times be caused simply because in QuickBooks there is not an automated means of updating the pay rates of all employees at once. Wage Manager Solution, a QuickBooks integrated application, not only allows you to change the pay rates for all of your employees at once, it will also allow you to create new payroll wage items, assign it to multiple employees AND add a rate of pay….all at the same time.
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Watch a brief (10 minute) video about how Wage Manager Solution works and download a Free Trial.
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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.
Check out Wage Manager Solution, a QuickBooks integrated application designed specifically to automate this process.
Watch a 10 minute video which provides an overview of how Wage Manager Solution works.
