Arizona Prop 206 and QuickBooks Desktop Payroll – Are You Ready

Prop 206 implementation is just around the corner! July 1st is fast approaching and businesses who process their own payroll need to be prepared. Employers must provide three pieces of information to the employees either in, or on an attachment to, the employee’s pay stub:

  • The amount of earned paid sick time available to the employee.
  • The amount of earned paid sick time taken by the employee to date in the year.
  • The amount of pay the employee has received as earned paid sick time.

The good news is that if you are processing payroll via QuickBooks it can be setup to print all three required pieces of information on the paystubs. In this article we are providing information specific to QuickBooks desktop version.

Before you begin to make changes you need to know your company’s paid sick leave policy. You will need to know the accrual year (Jan-Dec or July-June) as well as if your company will allow the sick time to rollover and how many hours can be used in a year. You also need to know if your company is subject to providing sick pay of 24 hours (for less than 15 employees) or 40 hours (for 15 or more employees).

To get started you will need to setup a payroll item for tracking the sick time. Under the EZ Setup method for a new item choose Paid Time Off (Sick Time, Vacation Time). This type of item will link to the accrual tracking. QuickBooks will then automatically take you to the Payroll Setup screen to ask what type of paid time off you are providing. Click the box for paid sick time off and move through the screens. You can then go back to your Payroll Item List to change the item name and expense account it will use. If you want to track your sick pay wages to different expense accounts for different types of employees then repeat this process as needed.

Now that you have your item(s) setup you will need to modify each employee to establish the sick pay parameters. Access the employee center and click on the first employee in the list…

  1. Click the edit icon and go to the Payroll Info tab. Click the Sick/Vacation button. The sick pay tracking is on the top half of the new window.
  2. Leave the hours available and hours used section blank. These would only be used for accruals prior to your changes. Assuming you are performing this task prior to July 1st you have no prior accruals to input.
  3. For hourly employees: The accrual period should be every hour on paycheck. The hours accrued per hour paid is 0.03333 (this is 1 divided by 30 which equates to one hour accrued for every thirty worked.)
  4. For salary employees: The accrual period should be every paycheck. The hours accrued per paycheck is 2.666 (this is the hours:minutes equivalent of one hour accrued for every thirty worked with the assumption of a 40 hour base.)
  5. The maximum number of hours should be calculated according to the accrual year chosen (40 or 24 for July-Jun or the prorated amount of 20 or 12 for Jan-Dec) and the number of your company’s employees (40 for 15 or more employees and 24 for less than 15 employees).
    You will need to make the appropriate adjustment in this field before your first payroll in July 2017 if your company has chosen the calendar year accrual.
  6. If your company policy is to pay out rather than rollover hours then click the reset hours each new year box and input when your year begins.
  7. The date to begin accruing sick time is July 1, 2017.
  8. Repeat these steps for each employee.

When you run payroll be sure that you use the new sick pay payroll items if you are paying out sick pay to an employee. QuickBooks will automatically run the hour accruals, your use of the proper payroll item will cause it to adjust for hours used and track the year-to-date amount paid.

This article is not intended to be a comprehensive overview of Proposition 206. For more detailed information on Proposition 206, we recommend visiting the Industrial Commission of Arizona website, or contact our team for assistance.

Heather Thompson
Heather Thompson

Heather Thompson is a Senior Manager at BeachFleischman PC and manages our Accounting Services department. She began her career in public accounting in 2005 and has extensive experience providing accounting services to a wide variety of industries.