Monday, June 12, 2017

How To Prepare QuickBooks Payroll for Arizona’s New Mandatory Sick Leave Under Prop 206

On November 8, 2016, Proposition 206: The Fair Wages and Healthy Families Act passed. There are two parts to Prop 206: the first is a minimum wage increase, and the second is a mandatory employer-provided sick leave. It is the requirement for private and municipal employers to provide paid sick leave to all employees beginning July 1, 2017. Under Prop 206, all employees must accrue paid sick time at a minimum rate of one (1) hour of paid sick time per every thirty (30) hours worked (not confined to a workweek or pay period). Employers with less than fifteen (15) employees, must provide and allow the use of twenty-four (24) hours of paid sick time per year, while employers with fifteen (15) or more employees must provide and allow the use of forty (40) hours of paid sick time a year.

Employers have 2 options to provide these hours to employees:

  1. On an accrual basis (1 hour of sick time accrued for every 30 hours worked).
  2. Front loading 24 hours or 3 days at the start of the calendar year, anniversary date, or 12 month basis.

To Enter the Accrual into QuickBooks Payroll

Starting July 1, 2017, employees will earn at least 1 hour of paid leave for every 30 hours worked. That works out to a little more than 8 days a year for someone who works full time. But employers can limit the amount of paid sick leave you can take in one year to 24 hours (3 days).

Minimum Accrual Calculation: 1 hr. divided by 30 hrs. = 0.03333 hours.
Hours are accrued per hour worked using the decimal calculation per hour with a maximum allowed number of hours.
Note: The maximum allowed is the maximum hours at any time. It does not enforce the yearly limit. 
However, if you use a professional time tracking software like TSheets, you can enforce a yearly cap. I highly recommend this software even if you are not using QuickBooks for payroll (works with ADP and other payroll service providers). 





To Front Load the Hours into QuickBooks Payroll

Employers also have the option of front loading the 24 hours (3 days) to their employees at the start of the calendar year, anniversary date, or 12 month basis.


Hours are accrued at the beginning of the year.

Hours are accrued on the anniversary date (hire date).

Hours are front loaded for employees.
The accrual method may be the preferred and more accurate way of allowing employees to earn their sick time for businesses that don't already provide a block of sick hours to be used. For those businesses that already have a sick pay policy where hours are not earned until after a tenure of employment (90 days, 1st year of employment, etc.), it may be better to switch to the accrual method. However, it may also be too difficult to track the amount used and stop the accrual beyond the yearly limit since the payroll service doesn't limit by year.

By front loading hours, the employer risks an employee using up their sick hours and leaving employment before actually earning them. However, by giving employees the maximum amount of hours up front, there is no need to keep track of when accrued hours have maxed out, so this is the easiest method to ensure compliance.



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