MYOB Business
Page tree

Versions Compared

Old Version 15

changes.mady.by.user AdrianC

Saved on

compared with

New Version 16

changes.mady.by.user AdrianC

Saved on

Key

  • This line was added.
  • This line was removed.
  • Formatting was changed.
HTML Wrap
classsection group
HTML
<span data-swiftype-index="true">
HTML Wrap
classcol span_3_of_5

You might owe an employee back pay to account for a wage increase, or to make up for an incorrect pay rate.

Back pay is the difference between:

  • how much the employee should have been paid over the back pay period, and
  • how much the employee was actually paid.

Once you've worked out the back pay amount you can include it on the employee's next pay.

UI Text Box
sizemedium
typenote

Tax on back pay

Tax on back pay can get complicated, and our example below is a simple one. Seek advice from your accounting advisor or the ATO for help with your specific back pay needs.

Before proceeding, make sure you've updated the employee's pay details to reflect their updated wage.

OK, let's step you through how to handle back pay.

 

UI Expand
title1. Work out what the employee should have been paid

Work out what the employee should have been paid

The easiest way to work this out is to review a sample pay for the employee using their updated wage details.

  1. From the Payroll menu, choose Create pay run.
  2. Select the employee's Pay cycle and click Next.
  3. Take note of the Gross ($) and PAYG ($) values for the employee.
  4. If necessary, multiply the values based on the amount of back pay that's due. Here's our example for a weekly pay which we've also multiplied by 4 to get values for a 4 week pay:
    Hand written note showing example gross pay and tax values for 1 week and 4 weeksImage Removed
  5. Click Save and close to exit the pay run.
UI Expand
title2. Work out what the employee was actually paid

Work out what the employee was actually paid

Run the Payroll register report to see what the employee was actually paid for the back pay period.

  1. From the Reporting menu, choose Reports.
  2. Click to open the Payroll register report.

  3. Filter the report:

    1. Select the employee who is owed back pay.

    2. Specify a date range to capture the back pay period.

  4. Take note of the employee's Wages ($) and Taxes ($) values.

UI Expand
title3. Calculate the back pay

Calculate the back pay

To calculate the back pay, subtract what the employee was actually paid from what they should have been paid.

This example shows the employee should have been paid $1500 in gross pay but was actually paid $1400. This also determines that an additional $10 of tax should have been withheld.

Hand written note showing example back pay determinationImage Removed

UI Expand
title4. Set up a Back Pay wage pay item

Set up a Back Pay wage pay item

Lump sum E payments (Australia only)

If the back pay accrued, or was payable, more than 12 months before the date of payment and is $1200 or more, the ATO classify it as a lump sum E. Learn more...

Checklist
TitleBefore you begin
 

Once you've worked out the back pay amount you can include it in the employee's next pay.

 

UI Expand
titleSet up the back pay payment

Set up the back pay payment

How you set up the back pay payment depends on your location.

UI Expand
titleI'm in Australia

To include the back pay on the employee's next pay,

set up

you'll need to create a Back Pay

wage

pay item. This pay item should already exist in MYOB, but you can set it up from scratch if needed.

From
  1. Go to the Payroll menu
, choose
  1. > Employees.
  2. Click the employee's name.
  3. Click the Payroll details tab
.
Click the
  1. > Salary and wages tab.
  2. Under Allocated wage pay items, click + Add wage pay item and choose Back Pay.
  3. If it isn't listed, click Create wage pay item
.Set
  1. and set up the pay item:
    1. Enter a Name, such as "Back Pay" or similar.
    2. Choose the applicable ATO reporting category. If unsure, check with your accounting advisor or the ATO. Learn more about assigning ATO reporting categories for Single Touch Payroll.
    3. Under Allocated employees, choose any additional employees who are entitled to back pay. By default, the pay item will be assigned to the employee
    4. Under Exemptions, choose any deductions or taxes that shouldn't be calculated on back pay. If unsure, check with your accounting advisor or the ATO.
  2. Click Save.

You can now pay the back pay as shown below.

Pay
UI Expand
title
5. Pay the back pay
I'm in New Zealand

To include the back pay

The simplest way to pay the back pay is to include it in the

on the employee's next pay

.Here's how:

, you'll need to use an earning pay item for it. If you've already created this earning you can assign it to the employee, otherwise you can set it up.

  1. From the Payroll menu, choose
Create pay run
  1. Employees.
Choose
  1. Click the employee's
Pay cycle. If the pay isn't part of a typical pay cycle, like a one-off bonus, choose Unscheduled.
  • Confirm the pay dates and click Next.
  • Select the employees you want to include in this pay, and deselect those you don't.
  • Click the arrow Image Removed to open the employee's pay.
  • Determine the PAYG payable:
  • Take note of the PAYG value shown in the employee's pay.
    • Add the back pay tax amount calculated in task 3 above to work out the total PAYG payable. You might need help from your accounting advisor or ATO to ensure the tax is correct
    1. name.
    2. Click the Standard pay tab.
    3. If you've already set up an earning for back pay, click + Add earnings and choose the back pay earning.
    4. If you haven't already set up a back pay earning:
      1. Click + Add earnings > Create earnings pay item.
        Image Added
      2. Enter a Name of earning and Name of earning on payslip, such as "Back Pay" or similar.
      3. For the Type, choose Allowance.
      4. For the Rate, choose Fixed amount per pay.
      5. Leave the Default rate ($) blank or set it to 0.00. You'll enter the back pay amount when you pay the employee in the next task.

      6. (Optional) If you have a separate account that you'll use to keep track of back pay payments:

        1. Select the option Override employee's earning expense account.

        2. Choose the applicable Wage expense account. How do I create accounts?
      7. For the Tax, choose Tax as extra pay. This will tax the back pay as a lump sum payment.
      8. Select whether or not to Include in KiwiSaver contributions. If unsure, check with your accounting advisor.
      9. Select whether or not to Include in gross earnings. If unsure, check with your accounting advisor.
      10. Under Employees using this pay item, choose any additional employees who are entitled to back pay.
    5. Click Save.

    The back pay earning will now appear when you pay the employee so you can enter their back pay. See the next task for details.

    UI Expand
    titlePay the back pay

    Pay the back pay

    You can include the back pay in the employee's next regular pay.

    1. Go to the Payroll menu > Create pay run.
    2. Choose the employee's Pay cycle, confirm the pay dates and click Next.
    3. Deselect the employee's you don't want to pay.
    4. Click the dropdown arrow Image Added to open the employee's pay.
    5. Enter the gross value of the back pay against the Back Pay pay item. In our example this is $100.Change the 
    6. (Australia only) If required, update the PAYG value to the figure you determined at step 3. Here's our example with $100 entered against the Back Pay pay item and $10 added to the PAYG valueensure the correct tax is withheld. For help working this out, speak to your accounting advisor or see this ATO information.
    7. Complete the pay as normal. Need a refresher?

    After paying the back pay

    You can remove the Back Pay pay item from the employee. You'll be able to use the Back Pay pay item again later if neededIf needed, you can re-use it later.

    1. Go to the Payroll menu and choose > Employees.
    2. Click to open the employee.
    3. Access the employee's recordallocated pay items.
        Click
        • If you're in Australia, click the Payroll details tab
        .Click the
        • > Salary and wages tab.
        Under Allocated wage pay items
        • In New Zealand, click the Standard pay tab.
      • Click the delete icon to remove the Back Pay pay item.
      • Click Save.
    HTML
     
    HTML Wrap
    width15%
    classcol span_1_of_5
     
    HTML Wrap
    floatleft
    classcol span_1_of_5
    Panelbox
    namemagenta
    titleRelated topics
    HTML Wrap
    classsidebarlinks

    Setting up pay items (AU)

    Assigning pay items to employees (AU)

    Do a pay run

    Was this information helpful?

    Yes
    No

    Why not?





    How would you improve this page?

    Unfortunately, we won't be able to respond to your feedback. Please don’t enter any personal information—if you need urgent help, contact our support team instead.

    Thanks for your feedback.

    Thanks! Anything you'd like to add?

    We’d love to know what worked so we can keep improving our help. Please don’t enter any personal information—if you need more help, get in touch with our support team.

     

     

     

     

    help
    Small Business
    MYOB Business
    MYOB
    Australia
    New Zealand



    Copyright © 2023 MYOB Technology Pty Ltd. All rights reserved