This video covers the manual processing of back payments only. If you would like to learn to use the automated back pay feature, click here.
Read below for the process on how to back-date a pay rise for an employee.
For a short video on the process, see here.
The example scenario:
Jordy's old pay rate was $20.00 per hour. His new pay rate is $25.00 per hour. He has already been paid up to 31/7/2021 (on the old rate). You want the new pay rate to apply from 1/7/2021.
You have updated the pay rate on his employee record, pay run defaults page.
Now his new pay rate will be applied to any earnings from now (or the effective date at the bottom of the pay run defaults page) on but here is how to work out and pay him for the period he is already been paid for, at the old rate.
How you will pay the back-dated pay rise
Create a separate pay category (click here if you need some assistance with this). In this example we will call the new pay category Back Pay, set the Units field to "fixed" (this pay category will not be accruing leave).
If overtime has been paid during this back pay period, then you will need to consider your options for paying this:
- Manually calculate the overtime back pay required and simply enter this amount into the back pay earnings line in the pay run (explained below), OR
- Make the unit Hourly on your Back Pay pay category and add linked pay categories with penalty loading/s that match your usual penalty rates (do not forget to make sure the Accrues Leave box is not ticked).
Making the pay category hourly will mean the back pay hours will be included in the total hours worked on the pay slip, so if this is likely to confuse your employees, use option 1.
For annual salaries the process is still the same; you will just need to calculate the difference between the equivalent hourly rates. The rate listed on the Pay Run Defaults page.
Finding out how much you need to pay
There are several report options but what you are looking for is a report that will show you both the number of hours that have been worked/paid at the "old" pay rate and the number of pay periods since 1/7.
Go to the Reports menu and select the Pay Categories report.
Filter your report for the period 1/7 - 31/7 and to show you Jordy's earnings only:
This report tells us the total number of hours (152) paid during the period and the number of pay periods (4). All that is left to do is to pay him.
How to actually pay it
You are going to add the back pay owed to his ordinary earnings in his next scheduled pay run:
- Click on Jordy's name to expand his record in the pay run
- Click on the Actions button within his record
- Select the Add Lump Sum Payment option
- Once the new earnings line is in the pay run, click on the down arrow and select the Back Pay pay category
- Enter $5 into the pay rate field (i.e. the difference between the old and the new rate)
- Enter 152 hours into the Units field
- Select method A and enter 4 into the weekly pay periods field
You can add a note either in the notes field of the Back Pay line or at the bottom of the record to explain the details of the back pay if necessary.
Entering the number of pay periods aggregates the PAYG tax so that Jordy will only pay the same amount of tax he would have paid, had he been paid at the higher rate since 1 July.
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