Vacation pay and sick pay are pay types you can use to compensate employees while they aren't at work according to their hourly rates. Use the steps below to create and assign vacation pay and sick pay policies, and to answer specific questions about how vacation pay and sick pay are accrued.

Use the information below to answer common questions about vacation pay and sick pay in Quickbooks Online Payroll.

How do employees earn time off?

For each policy, you can choose how you want employees to accrue sick or vacation hours.

At the beginning of the year

We'll credit the total hours you enter for the employee on the first paycheck of the following year (typically in January). Enter your employees' current balances as part of their setup.

Each pay period

Each pay period

We'll automatically calculate accruals each time you create a paycheck based on the number of pay periods in the year.

The following table shows the hours accrued per pay period for the common number of hours earned per year:

Hours earned per year Weekly Biweekly Twice a month Monthly
40 hours 0.7692 1.5385 1.6667 3.3333
80 hours 1.5385 3.0769 3.3333 6.6667
120 hours 2.3077 4.6154 5.0000 10.0000
160 hours 3.0769 6.1538 6.6667 13.3333

For example, if the employee receives 40 hours per year, with a biweekly pay period, the hours accrued per pay period is 40 / 26 = 1.5385.

Per hour worked

Vacation or sick time is accrued each pay period based on the “hours per hour worked” you set up and the number of hours worked on a paycheck.

For example, an employee with a vacation policy set up to accrue 0.05 hours per hour worked 40 hours in a weekly pay period. The employee will then accrue 2 hours of vacation time (0.05 X 40) when the paycheck is created for that period.

On anniversary date

Accruals calculate based on the anniversary of the employee's hire date. We credit the total hours that you entered for the employee on the first paycheck after the anniversary date.

Unlimited

When you select this option, the available hours in pay stubs will show as "Unlimited" instead of the actual number of hours available.

The Unlimited accrual frequency will permit the employer to grant an infinite amount of time off thus, no accrual of time off hours and maximum available amounts are needed.

Pay types that accrue vacation or sick time off

The following pay types trigger accrual of vacation pay or sick pay during payroll processing:

  • Hourly pay
  • Salary
  • Overtime and double overtime
  • Commission
  • Bonus

Balances carry over to new year

An employee's vacation and sick time balance automatically carry over into a new calendar year. For example, if an employee received 80 vacation hours per year with a maximum of 320 hours, the employee's vacation balance will continue to accrue until 320 available hours is reached, even if the period extends over several years.

There is no option to prevent carryover. If you have a "use it or lose it" policy (ex. unused sick time is eliminated at the end of the year), you need to change the employee's current balance at the beginning of each year.

Create or set up a vacation or sick pay policy

  • Online Payroll supports a maximum of two paid leave policies per employee (one vacation and one sick).
  • If you have a general paid time off (PTO) policy, you can use either the vacation or sick day option to set it up.
  • Online Payroll does not currently support annual accrual caps. You will need to track the total number of hours accrued if there is an annual accrual cap.

Use the steps below to assign policies to your employees in Online Payroll.

QuickBooks Online Payroll

  1. Sign in to Quickbooks Online.
  2. Go to Settings ⚙️ and select Payroll Settings.
  3. From Payroll, select Vacation / Sick / PTO.
  4. From Vacation and Sick Leave Policies, select Create.
  5. Set up the following:
    • Category
    • Description
    • Accrual Frequency
    • Hours earned per year - this may vary depending on the accrual frequency you choose
    • Maximum available
  6. Select OK.
  7. Assign the policy to an employee.

QuickBooks Full Service Payroll

  1. Sign in to QuickBooks Online.
  2. Select Workers, then Employees.
  3. Select the name of the employee.
  4. In the Pay section, select Edit ✎.
  5. In the How much do you pay [employee]? section, select Edit ✎.
  6. Select Sick Pay or Vacation Pay.
  7. Enter  hours per year and Maximum allowed hours (Optional).
  8. Select OK, then Done.

Intuit Online Payroll

  1. Sign in to Intuit Online Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Vacation and Sick Pay section, select Edit ✎.
  5. Select Add sick pay or Add vacation pay, as appropriate.
  6. Select New Vacation Policy or New Sick Policy from the Vacation Pay or Sick Pay ▼ drop-down menu.
  7. Enter the accrual rate, frequency, and limit you choose.
  8. Select Continue.
  9. Enter any balance adjustments as necessary.

Intuit Full Service Payroll

  1. Sign in to Intuit Full Service Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Vacation and sick pay policy section, select Edit.
  5. Select Add sick pay or Add vacation pay, as appropriate.
  6. Select New Vacation Policy or New Sick Policy from the Vacation Pay or Sick Pay ▼ drop-down menu.
  7. Enter the accrual rate, frequency, and limit you choose.
  8. Select Save.
  9. Enter any balance adjustments as necessary.

Assign a vacation or sick pay policy to an employee

Use the steps below to assign existing policies to employees in Online Payroll.

QuickBooks Online Payroll and QuickBooks Full Service Payroll

  1. Sign in to Quickbooks Online.
  2. Select Workers, then Employees.
  3. Select the name of the employee.
  4. In the Pay section, select Edit ✎.
  5. In the How much do you pay [employee]? section, select Edit ✎.
  6. Select Sick Pay or Vacation Pay.
  7. Select a policy from the ▼ drop-down menu.
  8. Add the correct Current Balance (the number of hours the employee has already earned), then select Done.

Intuit Online Payroll

  1. Sign in to Intuit Online Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Vacation and sick pay section, select Edit.
  5. Assign a policy to the selected employee.
  6. Add the correct Current Balance (the number of hours the employee has already earned), then selectOK.

Intuit Full Service Payroll

  1. Sign in to Intuit Full Service Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Vacation and sick pay policy section, select Edit.
  5. From the Vacation or Sick ▼ drop-down menu, select your existing policy.
  6. Select Save.

Disable vacation or sick pay accrual on a single paycheck

Use the steps below to turn off accrual for a particular paycheck for a given employee.

QuickBooks Online Payroll and QuickBooks Full Service Payroll

  1. Sign in to Quickbooks Online.
  2. Select Workers, then Employees.
  3. Select Run payroll.
  4. Select Edit ✎ beside the total pay amount.
  5. Uncheck Accrue vacation and sick leave for this paycheck.
  6. Select OK.

Intuit Online Payroll

  1. Sign in to Intuit Online Payroll.
  2. Select Payday
  3. Select the pay schedule of the employee you want to pay.
  4. Select the Check details icon.
  5. In the Additional Pay Types section, uncheck Accrue vacation and sick leave for this paycheck.
  6. Select Create.

Intuit Full Service Payroll

Note: Intuit Full Service Payroll only allows turning off accruals on unscheduled checks. You may run an unscheduled check for a given employee alongside the rest of your employees without causing processing issues.

  1. Sign in to Intuit Full Service Payroll.
  2. From the Home tab, select Create unscheduled checks.
  3. In the Select deductions to include on these unscheduled checks section, uncheck Accrue vacation and sick.
  4. Select Next and process payroll as normal.

Paid and unpaid time off policies

Paid time off and unpaid time off are two time off policies that are available in your Online Payroll service. These policies appear on pay stubs just like sick and vacation policies.

  • Paid time off can be used in place of sick or vacation time.
  • Unpaid time off can be used to track any time taken by employees that will not be compensated. Customers still cannot create a $0 paycheck, so if the employee is taking an extended time off, the employer may not be able to use the unpaid time off policy until the employee has returned to work and will have a paycheck.

Create or set up a paid or unpaid time off policy

QuickBooks Online Payroll

  1. Sign in to Quickbooks Online.
  2. Go to Settings ⚙️ and select Payroll Settings.
  3. In the Payroll section, select Paid time off or Unpaid time off.
  4. Add a Description.
  5. Adjust Accrual Frequency, Hours earned per year, and Maximum available hours.

QuickBooks Full Service Payroll

  1. Sign in to QuickBooks Online.
  2. Select Workers, then Employees.
  3. Select the name of the employee.
  4. In the Pay section, select Edit ✎.
  5. In the How much do you pay [employee]? section, select Edit ✎.
  6. Select Paid time off or Unpaid time off.
  7. Select an accrual option from the ▼ drop-down menu.
  8. Enter hours per year and maximum allowed hours (optional).
  9. Select OK, then Done.

Intuit Online Payroll

  1. Sign in to Intuit Online Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Time off section, select Edit.
  5. Select Add paid time off or Add unpaid time off.
  6. Enter the desired policy and any accrual information.
  7. Select Continue.
  8. Add any balance adjustments as necessary.
  9. Select OK.

Intuit Full Service Payroll

  1. Sign in to Intuit Full Service Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Time off section, select Edit.
  5. Select Add paid time off or Add unpaid time off.
  6. Enter the desired policy and any accrual information.
  7. Select Continue.
  8. Add any balance adjustments as necessary.
  9. Select OK.

Assign a paid or unpaid time off policy to an employee

QuikBooks Online Payroll and QuickBooks Full Service Payroll

  1. Sign in to Quickbooks Online.
  2. Select Workers, then Employees.
  3. Select the name of the employee.
  4. Select Edit employee.
  5. In the How much do you pay [employee]? section, select Edit ✎.
  6. Select Paid time off or Unpaid time off.
  7. Select an existing policy, and add the Current balance.
  8. Select Done.

Intuit Online Payroll

  1. Sign in to Intuit Online Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Time off section, select Edit.
  5. Select Add paid time off or Add unpaid time off.
  6. From the ▼ drop-down menu, select an existing policy for this employee.
  7. Add any balance adjustments as necessary.
  8. Select OK.

Intuit Full Service Payroll

  1. Sign in to Intuit Full Service Payroll.
  2. Select Employees.
  3. Select the name of the employee.
  4. In the Time off section, select Edit.
  5. From the ▼ drop-down menu, select an existing policy for this employee.
  6. Add any balance adjustments as necessary.
  7. Select Save.