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QuickBooks Payroll Tip – Wage Underpayments & Wage Restitution

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This QuickBooks payroll tip discusses underpaying employee wages and wage restitution, after paychecks have been created and cashed.

QuickBooks payroll tipsPaying 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:

  1. In the QuickBooks Payroll Item List, create a new Hourly Wage Payroll item and name it Wage Restitution
  2. 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)
  3. 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.

Watch a brief (10 minute) video about how Wage Manager Solution works and download a Free Trial.

 

2 Responses to QuickBooks Payroll Tip – Wage Underpayments & Wage Restitution

  • Lee Ann
    When you cut the restitution paycheck your accounting/payroll software will automatically calculate the taxes. All future payroll will be automatically updated accordingly.

  • This doesn’t tell me how to deal with the adjusting Federal withholding, State withholding etc so future paystubs show correct amounts
    Lee Ann
    .

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About Your Host:

Nancy Smyth, Certified QuickBooks ProAdvisor

Nancy Smyth, Sunburst Software Solutions, Inc.
QuickBooks Construction & Payroll Expert


I've been using and supporting QuickBooks products since the early 1990's. I've worked with thousands of contractors, assisting them with QuickBooks setup, Certified Payroll Reporting requirements, AIA Billing and Weighted-Average Overtime.


QuickBooks is a powerful product, but learning how to use it in your construction business can be difficult. I hope you find resources available here to be helpful.

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