To do this task
Go to the Employees menu, click Manage Payroll Items and then click New Payroll Item.
In the Add new payroll item window, click EZ Setup and then click Next.
Click Paid Time Off and then click Next.
If you're setting up sick and vacation time, click the two options: Paid sick time off and Paid vacation time off, or click whichever one you want to add.
Payroll items for both salaried and hourly employees are created. For example, if you choose Paid sick time off, the drop-down arrow in the Earnings table in the Preview Paycheck window will have both Salary Sick and Hourly Sick Rate options.
Click Next and then click Finish.