A journeyman takes Monday off for a family thing, then works four 10s Tuesday through Friday. The timesheet reads 48 hours.
Payroll wants to know how many of those are overtime. The job cost report wants to know which job ate them. If Friday was T&M, the customer is going to ask why there is time-and-a-half on the invoice.
Three questions, one hours record. Electrician PTO accrual and overtime tracking in QuickBooks answers about half of them, and it answers them in two different places: accrual lives in QuickBooks Online Payroll, overtime thresholds live in QuickBooks Time. Below is how to set up both, the four rules QuickBooks will not catch on your behalf, and the one thing that decides whether an overtime line survives a customer's review.
This is not legal advice. Wage-and-hour rules vary by state and by contract, and a collective bargaining agreement can be stricter than the law. Verify against your state labor department before you change a payroll setting.
The Short Answer: Three Buckets, Three Sets of Rules
Every hour on an electrician's timesheet falls into one of three buckets. Each one behaves differently in payroll, in job costing, and on an invoice.
| Bucket | Paid? | Counts toward the 40? | Belongs on a job? | Where it is configured |
| Hours worked (straight time) | Yes | Yes | Yes | QuickBooks Time |
| Overtime hours | Yes, at a premium | They are the hours past 40 | Yes, including the premium | QuickBooks Time |
| PTO, holiday, sick (paid, not worked) | Yes | No | No, overhead | QuickBooks Online Payroll |
Where PTO Accrual and Overtime Actually Live in QuickBooks
They are in two different products. Time off policies and accrual rates are set in QuickBooks Online Payroll on the employee's pay types. Overtime thresholds are set in QuickBooks Time under Company Settings, then Payroll and Overtime.
| Setting | Where it lives | What you will see on the screen |
| Time off policy and accrual method | Payroll, employee record, pay types | Time off pay policies, then the Hours are accrued dropdown |
| Accrual caps, carryover, negative balances | Same screen, inside the policy | A Balance and carryover section: a limit on how much accrues in a period, a maximum overall balance, and how much unused time carries into the next period |
| Weekly overtime after 40 | QuickBooks Time, Company Settings, Payroll and Overtime | An Overtime section with a weekly hours field, defaulted to 40 |
| Daily overtime, double time, California rules | Same screen | Same Overtime section as the weekly rule: daily hours (default 8), daily double time (default 12), and a California special-rules option. Confirm those toggles are present in your own account before you rely on them |
| PTO for 1099 subcontractors | Not available | Time off policies apply to W-2 employees on payroll |
One thing worth saying plainly, because most walkthroughs do not: QuickBooks Desktop and QuickBooks Online do not give you the same accrual controls. Desktop lets you check off which hour types are excluded from accrual. Online does not. Follow a Desktop-written article inside Online and you will hunt for a checkbox that is not in your product. Confirm the screen in front of you matches the instructions before you commit a policy to it.
How to Set Up PTO Accrual for a Crew Whose Hours Swing
Pick the accrual method first. It is the only decision here that is painful to reverse, because changing it mid-year usually does not backfill balances.
| Method | How it accrues | What it does on a 55-hour week | Fits |
| Per hour worked | Rate multiplied by hours | Accrues more; overtime hours inflate the balance unless excluded | Field crews with hours that swing 32 to 55 |
| Per pay period | Flat amount each period | Same accrual whether he worked 32 or 55 | Shops that want a predictable liability number |
| Annual lump sum | Credited once at the start of the year | No relationship to hours at all | Office staff, not field |
That is not an error, it is a policy choice. But it is a choice most shops make by accident. Three settings decide it:
- Do overtime hours accrue PTO? If your policy accrues on all hours worked, they do. If you want the balance to top out near your intended annual number, either exclude overtime hours or set a cap.
- Does PTO accrue on PTO? In QuickBooks Online Payroll, no. The control is the Hours are accrued dropdown on the employee's pay types screen; set it to per hour worked and the accrual runs on hours worked only, with no option to include holiday or PTO hours. QuickBooks Desktop offered checkboxes for exactly that, and Online does not, so a policy that accrues on all paid hours means adjusting balances by hand. Verify it against your own setup before you promise the crew either answer.
- Cap and carryover. In some states, including California, accrued vacation is treated as earned wages that cannot be forfeited (Labor Code 227.3). A "reset each year" toggle is a two-second click that can put you offside. Verify your state before you use it.
How to Set Up Overtime Tracking
Set the workweek start day first, then the weekly threshold, then any daily rules your state requires. In that order, because the first one changes the answer to the other two.
- Fix the workweek. Under the FLSA it is any fixed, regularly recurring period of 168 hours (29 CFR 778.105). Set it, document it, and leave it alone.
- Set weekly overtime after 40 hours worked. This is the federal floor and applies everywhere.
- Add daily overtime if your state requires it. See the table below.
- Add double time where it applies, by state law or by your CBA.
- Approve time before it hits payroll. A missed clock-out that runs 14 hours manufactures overtime that never happened, and it is far cheaper to catch on Friday than to correct after the run.
| State | Daily rule | Source |
| California | 1.5x after 8 in a day, 2x after 12; 7th consecutive day in a workweek is 1.5x for the first 8 and 2x after | Labor Code 510 |
| Colorado | 1.5x after 12 hours in a workday or 12 consecutive hours | COMPS Order #40, 7 CCR 1103-1 |
| Alaska | 1.5x after 8 in a day | AS 23.10.060 |
| Nevada | 1.5x after 8 in a day for employees earning under 1.5x minimum wage | NRS 608.018 |
| Federal floor | 1.5x after 40 hours worked in the workweek | FLSA |
Does PTO Count Toward the 40 Hours That Trigger Overtime?
No — PTO does not count toward the 40. Under the FLSA, overtime is owed on hours worked, and paid time off is not hours worked. A 32-hour week plus 8 hours of vacation is 40 paid hours with zero overtime owed.
The Department of Labor's regulations treat pay for occasional idle hours, vacation, holidays, and illness as pay for hours not worked (29 CFR 778.218). You can always be more generous than the floor. A CBA or your own policy can count PTO toward the threshold if you want it to. You just cannot be less generous than federal law.
| Week | Hours worked | PTO hours | Paid hours | Federal OT hours owed |
| A | 32 | 8 | 40 | 0 |
| B | 40 | 8 | 48 | 0 |
| C | 44 | 8 | 52 | 4 |
| D | 46 | 0 | 46 | 6 |
One caveat for daily-overtime states: daily thresholds also run on hours worked. Eight hours of vacation on Monday does not trigger California's 8-hour rule, because no work was performed.
Four Overtime Rules QuickBooks Will Not Catch for You
QuickBooks Time counts overtime hours. QuickBooks Online Payroll pays them, and it will not build the weighted-average regular rate for you when an electrician worked at two rates in the same week. Three of the four rules below are payroll-side arithmetic rather than anything a time clock can catch. The fourth is a setting you pick once and then live with.
1. Two rates in one week means one blended rate
When an electrician works at more than one rate in the same workweek, the overtime premium is computed on the weighted average of those rates (29 CFR 778.115), not on whichever rate he happened to be earning at hour 41.
Example, inputs visible: 24 hours of service work at $38 and 20 hours on a commercial fit-out at $44, so 44 hours worked.
| Step | Math | Result |
| Straight-time pay | (24 x $38) + (20 x $44) | $1,792.00 |
| Regular rate | $1,792.00 / 44 hours | $40.73 |
| Overtime premium | 4 hours x ($40.73 / 2) | $81.45 |
| Week total | $1,792.00 + $81.45 | $1,873.45 |
2. Some add-ons belong inside the regular rate
Nondiscretionary bonuses, shift differentials, hazard and hot-work pay generally go into the regular rate before you apply the multiplier. Truly discretionary bonuses and bona fide expense reimbursements stay out. A flat "per diem" paid whether or not the man traveled starts to look like wages rather than a reimbursement.
Example: a $200 production bonus earned in a 44-hour week adds $200 / 44 = $4.55 per hour to the regular rate. The additional half-time owed on 4 overtime hours is 4 x $2.27 = $9.09. Small on one week, and it is the kind of thing a wage audit adds up across two years.
3. The workweek start day quietly changes the answer
A Saturday callback belongs to last week or this week depending on where your workweek starts. Same hours, different overtime total, and the payroll system will not warn you. Pick a start day, write it down, and do not shift it to smooth out a heavy week.
4. Prevailing wage and CBAs run on their own math
On Davis-Bacon work, the overtime premium is computed on the basic hourly rate, not on base plus fringe (29 CFR 5.32). And many IBEW and NECA agreements do not accrue vacation at all. They fund it as a per-hour contribution to a vacation fund, which is a payroll item, not an accrual policy. Build that as a balance and the fund report will never reconcile.
Where PTO and the Overtime Premium Belong in Job Costing
PTO is overhead and should never carry a customer or a job. The overtime premium is a real cost of the job that caused it, and it needs a home you choose on purpose.
| Item | Job or overhead | Why |
| Straight-time hours worked | The job | Direct labor |
| The 1.0x portion of an overtime hour | The job | Still direct labor |
| The 0.5x premium | The job that required it, or one overtime-premium overhead account if you spread it | Either is defensible. Doing both on different jobs is not |
| PTO, holiday, sick | Overhead | The customer did not buy that day |
| Union vacation fund contribution | Burden on hours worked | It follows the hours, not a balance |
- Map time-off payroll items to an overhead expense account, not to a job cost account. In QuickBooks Desktop the payroll item setup asks you to pick that expense account, and the choice is the whole ballgame.
- Never attach a customer or job to a time-off entry. If your crew enters time off through a timesheet, make sure the job field is blank on those lines.
- If you route the overtime premium to overhead, take it out of your hourly burden rate the same way every time, or your estimates drift.
A Labeled Example: One 46-Hour Week With Vacation In It
Inputs, all visible and all changeable: workweek runs Sunday to Saturday. Journeyman cost rate $38 per hour. Bill rate $95 per hour, overtime billable at 1.5x under the contract. Monday is 8 hours vacation. Tuesday through Friday is four 10s on the Riverside fit-out. Saturday is a 6-hour callback at Medical Plaza.
| Line | Hours | Math | Result |
| Hours worked | 46 | 46 minus the 40 threshold | 6 overtime hours |
| PTO hours | 8 | Not hours worked | Adds nothing to the threshold |
| Straight-time cost | 46 | 46 x $38 | $1,748.00 |
| Overtime premium | 6 | 6 x $19 | $114.00 |
| PTO cost | 8 | 8 x $38 | $304.00 |
| Job cost, Riverside | 40 | 40 x $38 | $1,520.00 |
| Job cost, Medical Plaza | 6 | (6 x $38) + $114 premium | $342.00 |
| Overhead | 8 | PTO, no job | $304.00 |
| Billed to customer, Saturday OT | 6 | 6 x $142.50 | $855.00 |
The $855 is the line the customer will stop on. It needs one more thing before the invoice goes out.
Can You Bill Overtime on a T&M Job?
You can bill overtime on a T&M job only if the contract provides for it, and only at the rate the contract names. Even then, the overtime line is the one your customer reads twice.
An invoice line that reads "Overtime, 6.00 hrs at 1.5" asks the customer to take your word for it. He cannot reconstruct it, so he assumes padding, and now you are either discounting work you actually performed or winning an argument and losing a customer.
A line that reads "Sat 6:58a to 1:04p, 6.0 hrs OT. Terminated and meggered feeders to RTU-3 so the mechanical contractor could start Monday. Approved on site Friday 2:40p by Dave R." ends the conversation before it starts. Same hours, same money. The difference is that the second one explains itself.
Four things a defensible overtime line carries:
- Date and clock times, not a decimal total. Times read like a record; decimals read like a calculation.
- Who authorized it, by name, and when.
- The constraint that forced it. The inspection moved up. The tenant did not vacate until 4. The shutdown window was Saturday.
- What actually got done in those hours, in trade language.
The hard part is not the invoice. It is getting that one sentence out of a man who has been on his knees in a ceiling grid since 6:30 in the morning. Ask for one line, not a report, and ask for it while he is still standing on the job, at clock-out, not Monday in the office. Whatever you use to collect it, a paper daily field report, a group text thread, or time tracking software that prompts for it at clock-out (FieldTimesheet does this, and so do several others), the requirement is identical: one sentence, in his words, about what got done.
A filled-out example of what that produces is at the sample billing packet, and blank forms, including a labor backup sheet, a daily field report, a change-order log, and a T&M work authorization, are in the T&M Billing Backup Kit. Both are free and neither requires an account. For the wider billing structure, see T&M billing best practices.
When an Electrician Disputes His PTO Balance
Recompute the balance from hours instead of defending the number the software printed. Four steps, ten minutes.
- Pull his hours by pay period for the accrual year.
- Multiply qualifying hours by the accrual rate. Qualifying means whatever your written policy says: all hours paid, hours worked only, or hours worked excluding overtime.
- Subtract PTO used, by date.
- Compare to the balance on the stub.
- The opening balance was typed in wrong when the policy was created.
- A maximum balance stopped accrual partway through the year, usually in the fall after a heavy overtime stretch.
- The written policy accrues on hours paid while the software accrues on hours worked, so the balance was never going to match the handbook.
- The accrual method changed mid-year and the software did not backfill.
Frequently Asked Questions
Does PTO count toward the 40 hours that trigger overtime?
No. Federal overtime is owed on hours worked, and paid time off is not hours worked (29 CFR 778.218). A 32-hour week plus 8 hours of PTO is 40 paid hours with no overtime owed. You may choose to be more generous, and a CBA may require it, but you cannot go below the federal floor.
Why does the timesheet say 48 hours but the paycheck has no overtime on it?
Because 8 of those hours were paid time off. Forty hours were worked and eight were paid but not worked, so nothing crossed the 40-hour worked threshold. Show it as two columns, hours worked and hours paid, and the check reconciles on sight.
Do overtime hours earn PTO if my accrual is set to per hour worked?
They do, unless you exclude them or set a cap. Example: at 0.03846 hours of PTO per hour worked, a man logging 2,400 hours accrues about 92 hours rather than the 80 you probably intended. Decide which way you want it and write it into the policy.
Where do I set up PTO accrual, in QuickBooks Time or QuickBooks Online Payroll?
Accrual policies are in QuickBooks Online Payroll, on the employee's pay types, under Time off pay policies. QuickBooks Time is where overtime thresholds live, under Company Settings, then Payroll and Overtime. Two products, two screens, which is why searching for both at once returns half an answer.
Do 1099 electrical subcontractors get PTO or overtime?
No. Time off policies in QuickBooks Payroll apply to W-2 employees on payroll, and FLSA overtime applies to non-exempt employees. A 1099 sub accrues nothing and is owed no overtime premium. Worth confirming that everyone you treat as 1099 would survive a classification test, because the penalty for getting that wrong is back wages plus the overtime.
How do I keep PTO hours off my job cost reports?
Two settings. Map the time-off payroll item to an overhead expense account rather than a job cost account, and leave the customer or job field blank on every time-off entry. One PTO hour attached to a job inflates that job's labor forever, including in every estimate you build from its history.
Should the overtime premium go on the job or in overhead?
Either is defensible. Charging the 0.5x premium to the job that caused the overtime gives the truest picture of that job. Routing all premiums to one overhead account gives cleaner job-to-job comparisons. What is not defensible is doing it one way on some jobs and the other way on others.
Can I bill overtime to the customer on a T&M job?
Only if your contract provides for it, at the rate the contract states. Get written authorization before the hours are worked, and put the reason on the invoice backup. An overtime line with a date, clock times, an authorizing name, and a description of the work gets paid. A decimal total gets a phone call.
The Part Worth Getting Right
The settings take an afternoon. Pick the accrual method, set the rate and the cap, fix your workweek, turn on the daily rules your state requires, and map the time-off item to overhead.
What the settings cannot do is explain an hour after the fact. PTO balances, overtime premiums, and invoice disputes all trace back to the same record, and when that record is a bare number, you end up arguing with your own journeyman about a balance or with a customer about a premium. Both arguments have the same fix: an hour that says what it was.