Employee payroll items capture all the specific functions involved in a business payroll system.

If you have read my post on how to integrate and set up Payroll in QuickBooks, you should have learnt the steps to activating your License Key and unlocking the payroll features into your already installed QuickBooks Accounting Software to simplify your payroll processing needs.

As a business owner, your payroll system may be different from other business needs. 




Hence, it is important for you to learn how to customize the QuickBooks Payroll to suit your business.

For example, you may process compensation benefits, insurances, pension, salaries, contributions and tax liabilities while other employers do all except contributions.

How would you set up your payroll software to capture specific features related to your business?

Here are the steps to take on QuickBooks Payroll Software:


On the QuickBooks menu, click Employee


When you select Add or Edit Payroll item List, you will see a payroll item window - which helps you to customize your payroll features.


To add a new payroll item, click Payroll item at the bottom left and click New.


When you click New, Payroll item type:


On this window, select the payroll item type you want to set-up.

I will show you steps on how to set each of these items up.

Set-up Wages: Select the Wage  button and click Next


Select the payment plan you use to pay your employee and click Next.


Select Regular Pay, Sick Pay or Holiday Pay and click Next.


Enter the description of your preferred payroll payments and click Next


Select the box if this payroll item is add to your employee base earning when calculating pensionable earnings.

Click Next


From the drop-down box, select the Payroll expenses account to track your wages or salary.

Click Finish

To set up Deduction:

Deduction are subtractions on your period end earnings. When you select deduction, payroll system will help you set items like pension which will be deducted from employees earnings and paid into a specified pension management account.


Select Deduction and click Next


Enter the name use to describe your preferred pension and click Next.


Thick Pension Contribution, if you have already registered with a pension fund who will be the sole custodian of your employees deduction and click Next.



Enter Agency To Which Liability Is paid: Use this field to enter the pension manager's name.

Enter The Number That Identifies You To The Agency: Enter your unique number as provided by your pension manager.

Liability Account: Select the account to track total deduction payable to your pension manager.

Click Next to continue.


Click Next to continue



Pension is tax deductible.

From the payroll items, select Income Tax and click Next


Select Neither and click Next



Enter the specific rate of deduction on your employees' earnings and click Finish.

To set Addition: Allowance

This is like a bonus or increase to your employees earnings.


Thick Addition and click Next


Enter name of your preferred allowance - for example, auto allowance, children allowance etc.

Click Next


Select this if employees' bonus or allowance are added to their base earnings when you calculate their pension or leave blank.


Select Payroll Expenses to track this payroll item.


Select Earnings if you want addition to appear on Tax form as earnings and click Next.


Select the Tax that will be affected by this addition and click Next.


Select Neither to enable your payroll addition to be based on Net or Gross or a flat amount per payroll payment.



Enter your business default rate of addition and click Finish to set-up an Addition.

To set up Employer Contribution:

if you provide insurance related benefits to your employees, you can set up your contribution to insurance on QuickBooks with the payroll items.


Thick Employer Contribution and click Next


Enter the name of your contribution and click Next.

If this contribution is tailored to a specific project, select Track Expenses By Job.


Select Pension contribution if this contribution is paid into a pension fund otherwise leave blank and click Next.



Enter name of agency to which liability is paid: Enter the name of the agency you are paying the contribution to.

Enter the number that identifies you: Enter your unique number as provided by the agency.
Liability account: select payroll liabilities.

Expenses account: select payroll Expenses.

Click Next


Select None.

Click Next


Select all the payroll items since this contribution is added to wages before calculating your TAX and click Next.


Thick Neither so that your payroll contribution will be based on a certain percentage of Net or Gross and click Next.




Enter the rate applicable to your business and click Finish.

See my post on how to pay employees in QuickBooks

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