Payroll Tip-Worker’s Comp Tracking on Vacation, Holiday & Overtime Pay

Payroll can be one of the most complex duties of any bookkeeper’s job – especially when you need to OR want to track your Worker’s Compensation costs for job costing purposes and pay your employees Vacation, Holiday and Overtime wages.  Just take a look at this question, submitted by one of our blog subscribers!

I have set up the Workers Compensation tracking in QuickBooks for a construction company with no problem, it seems to be working fine.  My question is – how do you keep track of Holiday, Vacation, and Overtime pay?  Do I set up each payroll item with the Workers Comp {WC} rate for each class?  For example Carpenter-Holiday and Carpenter-Vacation?  Thanks, Kathleen

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Answer:

Hi Kathleen;

That’s an excellent question!

One of the first things that you should do is contact your Worker’s Compensation Insurance carrier and ask them if there is a reduced Worker’s Comp rate for when  you pay your field workers for non-field related time such as Vacation or Holiday pay.  I once asked this question of the Insurance underwriter and much to my surprise he told me {grudgingly} that Vacation and Holiday pay for field employees was computed at a lower experience rate than their normal wages; mainly because there was “no risk” involved for those wages – he quickly followed this up with “but this will involve more tracking on your part” for the annual audit/review.

The QuickBooks payroll module is pretty darn flexible; but like the rest of the program it’s generic – so sometimes it’s  a little “lacking” when it comes to some specific things like the situation above.

Even if I didn’t fall into the special situation of a reduced WC Experience Rate for Holiday and Vacation time, I would still create specific payroll items based on Work Classification/type of wage: so Carpenter-Holiday or Carpenter-Vacation would be the way I would go.

Overtime can get tricky, especially if your contractor client works on prevailing wage jobs and pays the fringe benefit portion of the prevailing wage in cash to the employee as part of the hourly gross wage, QuickBooks will need some “help” when determining the overtime rate.  {This becomes complex and cannot be explained in a blog post but I plan on providing a fee-based live and pre-recorded webinar on how to set this up and make it work in QuickBooks – which will be available in January 2012}.

You will need to add an “Overtime” payroll item to your Payroll Item List using either the E-Z Setup or Custom Setup method naming them Carpenter OT, Laborer OT, etc and being sure that you select that the type of wage is an Overtime rate.  If the premium OR half-time portion of overtime pay is excluded from Worker’s Compensation tracking, make sure that you have checked that option in the Workers Compensation preference; found from the Edit menu -> Preferences -> Payroll & Employees -> Workers Compensation button and checking the option to “Exclude overtime premium from Workers Comp calculation”

Make sure that your Codes in the Workers Comp List are descriptive – meaning that when you choose the WC Code in Weekly timesheets that you will understand what code is being assigned to what payroll item.

Setting things up in this manner will provide you with all the payroll numbers that you will need during an audit and clearly indicate the type of wages that are being paid.

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