Back pay

To include the back pay on the employee's next pay, you'll need to create a Back Pay pay item. This pay item should already exist in MYOB, but you can set it up from scratch if needed.

1. Go to the Payroll menu > Employees.
2. Click the employee's name.
3. Click the Payroll details tab > Salary and wages tab.
4. Under Allocated wage pay items, click + Add wage pay item and choose Back Pay.
5. If it isn't listed, click Create wage pay item 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. If you choose Lump Sum E, also choose the Financial year the lump sum relates to. Learn more about lump sum E payments.
   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.
6. Click Save.

You can now pay the back pay as shown below.

To include the back pay on the employee's next pay, 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 Employees.
2. Click the employee's name.
3. Click the Standard pay tab.
4. If you've already set up an earning for back pay, click + Add earnings and choose the back pay earning.
5. If you haven't already set up a back pay earning:
   1. Click + Add earnings > Create earnings pay item.
      
   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.
6. 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.