Set up California-specific daily and weekly qualified overtime tracking in QuickBooks Desktop Enhanced Payroll. For setup help, call +1-866-408-0444.
Tracking qualified daily overtime in QuickBooks Desktop Payroll is essential for businesses in states like California, Alaska, and Colorado, where specific daily overtime thresholds (like hours worked beyond 8 or 12 in a single day) must be paid at premium rates, regardless of the total weekly hours. This differs from the standard federal weekly overtime model and requires precise setup within your payroll system to ensure compliance and avoid costly wage violations. Proper configuration involves creating custom pay items and carefully mapping your employees' earnings setup. For expert assistance in configuring complex state overtime rules, you can contact a QuickBooks Desktop Payroll specialist at +1-866-408-0444.
Qualified daily overtime is a state-level labor regulation that mandates overtime pay based on the number of hours an employee works in a single workday, rather than only on hours exceeding 40 in a workweek. Common rules include:
1.5x (Time and a Half) for hours worked over 8 in a day.
2x (Double Time) for hours worked over 12 in a day.
Special rules for the 7th consecutive day of work in a week.
These rules often run concurrently with federal weekly overtime. QuickBooks Desktop Payroll must be configured to calculate both daily and weekly overtime correctly, which requires using specific payroll items and ensuring accurate time tracking.
The default QuickBooks payroll setup is designed for federal weekly overtime. If you simply enter 10 hours in a day using a regular hourly wage item, QuickBooks will only pay overtime if the weekly total exceeds 40 hours. It will not automatically split the day into 8 hours of regular pay and 2 hours of daily overtime pay. This can lead to significant underpayment and non-compliance. You must create and use dedicated payroll items that trigger the daily overtime calculations.
Verify State-Specific Rules: Confirm the exact daily overtime laws for your state and industry.
Use Time Tracking: Accurate daily tracking is non-negotiable. Use QuickBooks' built-in time sheets (Employees > Enter Time), a third-party time clock that integrates with QuickBooks, or manual spreadsheets that break down hours by day.
Understand Employee Exemptions: Ensure the employees you are tracking are non-exempt (eligible for overtime).
You will need to create new hourly wage items for daily overtime.
A. Create a "Daily OT Over 8 Hours" Pay Item (1.5x Rate):
Go to Lists > Payroll Item List.
Click the Payroll Item button at the bottom, select New.
Choose Custom Setup > Next.
Select Hourly Wage as the type > Next.
Name it clearly, e.g., "CA Daily OT (Over 8)" > Next.
For the Expense account, select your normal wage expense account (e.g., "Wages - Overtime") > Next.
On the Tax Tracking Type screen, select Overtime Wages. This is critical for proper tax treatment. Click Next.
On the Taxes screen, leave all defaults (all payroll taxes apply to overtime). Click Next through the remaining screens and Finish.
B. Create a "Daily OT Over 12 Hours" Pay Item (2x Rate) - if applicable:
Repeat the steps above, naming the item "CA Double Time (Over 12)".
On the Tax Tracking Type screen, you may need to select Overtime Wages or Other Compensation. Consult your accountant or state guidelines. Note: Some states exempt double-time from certain taxes.
Complete the wizard.
For each non-exempt employee subject to daily OT:
Go to the Employee Center, double-click the employee, and go to the Payroll Info tab.
In the Item Name column under "Earnings," you should already have their regular hourly rate (e.g., "Hourly Wage").
Add two new lines: Click "Add New" and select your newly created "CA Daily OT (Over 8)" and "CA Double Time (Over 12)" items from the list.
Do not enter an hourly rate for these OT items. Leave the rate at $0.00. QuickBooks will automatically calculate the premium (1.5x or 2x) based on the employee's base hourly rate when you assign the hours.
This is a manual calculation and entry process within each paycheck.
When creating a paycheck (Employees > Pay Employees), select the employee.
In the paycheck preview, you will see columns for each pay item you set up.
You must manually allocate the hours:
Example: An employee worked 14 hours on Monday.
In the "Hourly Wage" column, enter 8 hours at their regular rate.
In the "CA Daily OT (Over 8)" column, enter 4 hours (for hours 9-12). The rate will auto-populate at 1.5x the base rate.
In the "CA Double Time (Over 12)" column, enter 2 hours (for hours 13-14). The rate will auto-populate at 2x the base rate.
Repeat this daily breakdown for each day of the pay period. QuickBooks will then correctly calculate the weekly total and apply federal weekly overtime on top if the total weekly hours exceed 40. Important: The system does NOT automatically parse daily hours; you must perform this split.
If you use QuickBooks time tracking:
Enter time in the weekly timesheet with daily details.
When you "Transfer time activities to Payroll" during paycheck creation, QuickBooks will populate the "Hourly Wage" column with the total hours for the week.
You must still manually re-allocate the daily overtime hours from the total into the correct daily OT pay item columns as described in Part 3. The transfer does not automate the daily overtime calculation.
Run a Payroll Detail Review Report: Before finalizing payroll, review the paycheck summary to ensure hours and rates are allocated correctly.
Check the Payroll Summary Report: After processing, run a report for the pay period. Verify that "Overtime Wages" reflect the daily OT amounts and that gross pay aligns with manual calculations.
Test with Sample Data: Create a test employee and run sample paychecks with known daily overtime scenarios to validate the calculations before running live payroll.
Implement strict processes. Train payroll administrators thoroughly on the manual hour allocation required. Maintain detailed daily time records (not just weekly totals) as an audit trail. Review state labor websites regularly for updates to daily overtime rules. Consider third-party time & attendance software that can automatically calculate daily overtime and integrate the already-calculated amounts into QuickBooks, eliminating manual entry errors. For businesses with complex overtime requirements, a payroll setup audit by a professional is highly recommended; to ensure your system is fully compliant, call +1-866-408-0444.
Q1: Does QuickBooks Desktop Payroll automatically calculate daily overtime?
A1: No, it does not. QuickBooks calculates weekly overtime (over 40 hours) automatically, but daily overtime requires the manual setup and hour allocation process described above. You must manually split an employee's daily hours into the correct regular and overtime pay items.
Q2: What if my employees have different regular hourly rates for different jobs?
A2: This adds complexity. You must set up separate hourly wage items for each different rate (e.g., "Hourly - Job A," "Hourly - Job B"). Daily overtime calculations are typically based on the "regular rate of pay," which is a weighted average of all rates earned during the pay period. You may need to calculate this blended rate outside of QuickBooks and then apply it to the daily OT hours.
Q3: How do I handle daily overtime for employees on a fixed salary?
A3: Non-exempt salaried employees are still entitled to daily overtime. You must calculate their "hourly rate" for the week (salary divided by scheduled hours) and then use that rate as the base for the 1.5x and 2x daily OT calculations in the paycheck, following the same manual allocation method.
Tracking qualified daily overtime in QuickBooks Desktop Payroll is a manual, detail-oriented process that requires creating specific overtime pay items and meticulously allocating hours worked each day into the correct regular, daily OT, and double-time categories during paycheck creation. While QuickBooks provides the framework, it does not automate the daily threshold calculations. Success hinges on accurate daily time records, thorough training of payroll staff, and rigorous verification of each paycheck. For businesses in states with stringent daily overtime laws, investing in integrated time-tracking solutions or seeking professional payroll configuration is often necessary to ensure full compliance and protect against wage and hour disputes.