Vacation Pay - The Ins and Outs

1. Apply all withholding taxes to vacation pay.

2. You can accrue paid vacation differently by the job, because it is a matter of company policy, not federal law. For example, give managers two days' paid vacation for each month worked, a clerk one or no days. Or, base paid vacation on salary, years worked or a mix of standards. But the policy should be in writing, made known to employees and applied consistently.

3. You need not include paid vacation days in overtime calculations. For example, if an employee works 40 hours, Monday-Thursday and takes a paid vacation day on Friday, you need not include the paid Friday hours when determining whether the employee is entitled to overtime pay.

4. If vacation pay is included in a normal paycheck, withhold for the entire check over a longer period. For example, if you pay weekly and include one week’s paid vacation, withhold for a two-week period.

5. You must pay earned or accrued vacation if the employee quits. Have a written policy that clearly states who is or is not entitled to accrued vacation pay at termination. Reminder: Employees may be entitled to unused vacation pay under ERISA (covers early retirement) if there is a written policy or a pattern or practice of paying unused accrued vacation to such employees.

Important: These are the rules under federal law. Where appropriate, also check your state laws.

Keeping Track in Tough Times

We all know the economy is not at it's best right now. Everyone is looking for ways to trim expenses and boost profits. One area you definately don't want to neglect is your accounting. It is your books that will show you whether you are doing well or not, which makes keeping them accurate more important than ever.

That doesn't mean that you need a full time bookkeeper or even a part time one. Depending on the size of your business you may just need someone to come in once or twice a month and crunch the numbers into your software program.

Keeping it up-to-date will enable you to generate meaningful reports that can help you see where you are spending, where you can cut back and what your bottom line is.

A Monthly Financial Review

In order to determine the profitability of your business each month you should look at your income statement, also known as a profit and loss statement. If you are keeping your books with a software program such as QuickBooks, once your data is entered you can just go to the report function and the software will automatically create the report for you.

You should review the report to see where your expenses were and if any of them were out of the ordinary. You will also see how profitable a month you had.

By taking a look at the statements each month you can keep expenses in check and not be surprised at the end of the year.

If you do not have time to enter the data yourself, you should consider hiring a freelance bookkeeper/accountant so that you are able to track where you are at financially all year long.