How to Process 'Back Payment'


This article covers the manual processing of back payments only. If you would like to learn to use the automated back pay feature, click here.

So you've given your employee a pay rise and want to 'back date' problem.

The example scenario:

The employee's old pay rate was $20.00 per hour

Their new pay rate is $25.00 per hour

They have already been paid up to 31st August (on the old rate)

You want the new pay rate to apply from 1st July

You've updated the pay rate on their employee record, pay run defaults page...

Now the 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's how to work out and pay them for the period they have already been paid for, at the old rate.

How you'll pay it

Create a separate pay category (click here if you need some assistance with this).  In this example we'll call the new pay category Back Pay, set the Units field to "fixed" (this pay category won't be accruing leave):


If overtime has been paid during this 'back pay' period then you'll need to consider your options for paying this:

  1. 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
  2. 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. 
    Note: 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.

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 1st July

Go to the Reports menu and select the Pay Categories report...

Filter your report for the period 1st July - 31st August and to show you the employee's earnings only, filter using the employee's name.

This report tells us the total number of hours paid during the period and the number of pay periods.  All that's left to do is to pay him.  

How to actually pay it

You're going to add the back pay owed to his ordinary earnings in his next scheduled pay run so...

  • click on the employee'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 (ie. the difference between the old and the new rate)
  • enter the required hours into the Units 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.


If you have any questions or feedback, please let us know via


Was this article helpful?
0 out of 0 found this helpful



Article is closed for comments.