ANSWER ID:9121AccountEdge Pro and Network Edition, Australia only AccountEdge will not automatically deal with back pay. Instead, there are a number of manual changes to the gross pay and PAYG Income Tax for the back pay that need to be made. An employee might be owed 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. 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 |
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| title | 1. Determine the change in gross pay that is taxable |
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| Determine the amount of gross wages the employee would have received over the back pay period given the INCREASE in their pay rate or salary.Determine the amount of gross wages the employee actually received over the back pay period given NO INCREASE in the pay rate or salary.Calculate the change in gross wages by subtracting the figure calculated in Step 2 from the figure calculated in Step 1. This will give you the difference in gross wages for the back pay period. In most cases this should be a positive figure. | 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. - Start a new pay run for the employee.
- Click the zoom arrow to review their pay details on the Pay Employee window.
- Take note of the gross pay and PAYG Withholding values. Here's our example for a weekly pay:
 Image Added - If necessary, multiply the values based on the number of weeks of back pay that is due.
- Cancel the pay without saving.
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| title | 2. Determine the change in PAYG Income Tax |
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| - Determine the amount of PAYG Income Tax that would have been deducted over the back pay period given the INCREASE in their pay rate or salary.
- Determine the amount of PAYG Income Tax actually deducted over the back pay period given NO INCREASE in the pay rate or salary.
- Calculate the change in PAYG Income Tax by subtracting the figure calculated in Step 2 from the figure calculated in Step 1. This will give you the difference in PAYG Income Tax for the back pay period. In most cases this should be a positive figure.
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| title | 3. Writing the paycheque which includes the back pay |
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| - Write the paycheque for the employee pay. This pay would firstly include their wage for that pay period which would be calculated using the new rate of pay.
- Take a note of the PAYG Income Tax amount that the payroll module has automatically calculated and write it on a separate sheet of paper.
- Add the result calculated in Task 2 above to the figure written down in step 1. This will give us the figure that needs to be entered for PAYG Income Tax on the paycheque. Do not manually change anything on the paycheque in this step.
- Add the figure calculated in Task 1 above to the wage for that pay period, this will automatically adjust the PAYG Tax Amount to an INCORRECT figure.
- Now change the PAYG Tax to the figure calculated in step 3.
This will result in the paycheque having the correct PAYG Income Tax and the correct amount of back pay included in the employee's normal pay period's wages. | Work out what the employee was actually paid |
| The Payroll Activity (Detail) report provides this information. - Run the Payroll Activity (Detail) report for the back pay period (Reports > Index to Reports > Payroll > Employees > Activity Detail).
- Filter the report.
- Select the employee who is owed back pay.
- Specify a date range to capture the back pay period.
- Take note of the employee's Wages and Taxes values.
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| title | 3. Calculate the back pay |
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| 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.  Image Added
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| title | 4. Add the Back Pay wage category to the employee |
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| To be able to add back pay to an employee's pay, add the Back Pay wage category to their card. - Go to Card File > Cards List > Employee tab > open the employee's card.
- Click the Payroll Details tab.
- Click Wages.
- Select the Back Pay wage category.
 Image Added - Click OK.
- Click Close to close the Cards List.
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| You can now include the back pay in the employee's next pay. - Start a new pay run for the employee.
- Click the zoom arrow to review their pay details on the Pay Employee window.
- Determine the PAYG Withholding payable:
- Take note of the PAYG Withholding value shown in the employee's pay.
- Add the back pay tax amount calculated above to work out the total tax payable.
- Enter the gross back pay value against the Back Pay category.
- Change the PAYG Withholding value to the figure you calculated at step 3. Here's our example with $100 entered against the Back Pay wage category and the PAYG Withholding value adjusted.
 Image Added - Record the pay.
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