Back pay

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, chose Enter pay.
2. Select the employee then click Start pay run.
3. Take note of the Gross and PAYG values. Here's our example for a weekly pay which we've also multiplied by 4 to get values for a 4 week pay:
   
4. If necessary, multiply the values based on the number of weeks of back pay that is due.
5. Cancel the pay without saving, e.g. go to the Dashboard or any other page.

Work out what the employee was actually paid

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

1. From the Reports menu, choose Payroll summary & details. The Payroll reports page appears.
2. Use the From and To dates to specify the back pay period.
3. Click Summary report.
4. Take note of the Gross and PAYG values for the back pay period.

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 means they are owed $100 in back pay. This can also help to work out if additional tax needs to be withheld. In our example, $10 of tax needs to be withheld from the back pay.

Set up a new wage pay item

To include the back pay on the employee's next pay, set up a Back Pay wage pay item. This pay item should already exist in <product name?>, but you can set it up from scratch if needed.

1. From the Payroll menu, choose Employees.
2. Click the employee's name.
3. Click the Payroll details tab.
4. Click the Salary and wages tab.
5. Under Allocated wage pay items, click the dropdown arrow and choose Back Pay. If it isn't listed, click Create wage pay item.
6. 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.
   Here's our example:
   <insert pic>
7. Click Save.

You can now pay the back pay as shown below.

Pay the back pay

The simplest way to pay the back pay is to include it in the employee's next pay.

Here's how:

1. From the Payroll menu, chose Enter pay.
2. Select the applicable dates under Confirm dates.
3. Select the employee then click Start pay run.
4. Determine the PAYG/PAYE payable:
1. Take note of the PAYG/PAYE value shown in the employee's pay.
2. Add the back pay tax amount calculated in task 3 above to work out the total tax payable. You might need help from your accounting advisor or ATO/IRD to ensure the tax is correct.
5. Next to the Back Pay earning, enter the gross value of the back pay. In our example this is $100.
6. Change the  PAYG/PAYE  value to the figure you determined at step 4. Here's our example with $100 entered against the  Back Pay  earning and $10 added to the PAYG value.
   
7. Complete the pay as normal.