Back pay

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An employee might be owed back pay to account for a wage increase, or to make up for an incorrect pay rate.

The back pay will be the difference between how much the employee should have been paid and how much they were actually paid. Once you know how much back pay is due, you can include it on the employee's next pay.

Let's step you through how to handle back pay. But first, make sure you've updated the employee's pay details to reflect their current (correct) pay rate.

1. Work out the back pay

Work out what the employee should have been paid

Start a new pay run for the employee and review their pay details. The values shown will be based on the employee's updated pay rate.
Take note of the gross pay (Base Salary or Base Hourly) and PAYG Withholding values.
Calculate the gross pay and PAYG Withholding values for the back pay period. For example, if the employee's pay is for 1 week and the back pay period is 4 weeks, multiply the values by 4.
Cancel the pay run without saving.

Work out what the employee was actually paid

Run the Payroll Activity (Summary) report for the back pay period (Reports > Index to Reports > Payroll > Employees > Activity Summary).
Filter the report for the employee who is owed back pay.
Take note of the employee's Wages and Taxes values.

Work out the back pay

Subtract the was actually paid values from the should have been paid values to work out the back pay.

Example:

2. Pay the back pay

Once you've worked out the back pay values, you can include them in the employee's next pay.

Want to show the back pay separately on the pay? Open the Back Pay wage category (Payroll > Payroll Categories > Wages tab > Back Pay category), click Employee and select the employee being paid back pay. This will allow you to enter the back pay value against this category on the employee's pay.

Start a new pay run for the employee and review their pay details.
Determine the PAYG Withholding payable:

On a piece of paper, write down the PAYG Withholding value shown in the employee's pay, and
add the back pay tax amount calculated above.

Include the gross back pay value in the pay.
- If you're using the Back Pay wage category, enter the amount against this category.
- If you're not using the Back Pay wage category, add the amount to the Base Salary or Base Hourly category.
Change the PAYG Withholding value to the figure you calculated at step 2.
Record the pay.