Automate the back payment process on payroll classic

1. Click the  Business menu.
2. Click the Payroll Settings submenu.
3. Under Pay Conditions, click Back Pay.
4. Click on Add.
5. Click on Add Employees.
6. In the context panel, select the applicable pay schedule the employees would be associated with.
7. Select the date range of when the changes to the employee pay rates would have occurred.

   Important

   The platform will only allow users to present and historical dates. Any active future pay adjustments recorded for an employee will not be acknowledged as they do not warrant a back pay.

8. If you want to include terminated employees in the search, tick the Include terminated employee(s) checkbox.
9. Click Search.

   Helpful Hint

   A list will then appear with any employees fitting the criteria searched and show the old (previous) rate with the new (current) rate. If you have included terminated employees in your search, they will be identified with a star next to their name.

   
10. Tick the checkbox on the left of the name of the employees that require a back pay.

    Helpful Hint

    If all employees need a back pay, you can tick the checkbox in the header and this will select all the employees.

11. Click the Add button to populate the back pay table. The table will look like this:
    
    
    

    Important

    To learn about the columns and actions related to the back payment table, please refer to the Back pay table: columns and activities item in the Further information section at the bottom of this article.

12. You are now ready for Step 2.

    Helpful Hint

    If an employee’s pay details have changed from an annual arrangement to an hourly arrangement, or from a daily arrangement to an annual arrangement, and the employee’s primary pay category unit is configured to the same unit type as the new arrangement, this scenario will be ignored and the employee will not display in the search list. The reason for this is that this scenario is treated as a change to employment conditions rather than a back pay.

1. Review the back pay records for eligible employees.
2. Click the Complete button if you are confident that the records can now be processed in the pay run.

   Warning

   Clicking the Complete button will lock the records, meaning you cannot edit or delete the back payment after you mark it so. Make sure you make all the required edits before clicking the Complete button.

3. Click the I understand checkbox.
4. Click the Complete button.
   
   

   Important

   This warning displays to clarify that the platform will not automatically process these back pays in the background. Instead, the back payment records will display when either:

   • The pay run associated with the employee’s pay schedule is subsequently created; or
   • An adhoc pay run is created and the employees associated with the back payments are manually added to that adhoc pay run.

   Helpful Hint

   You can scroll to the Further information at the bottom part of this article to read these two items:

   • How does the platform calculate back pay on paid leave earnings?
   • How does the platform pro-rata the hours owed for back pay?

To apply the necessary back payments to the pay run, you can follow these steps:

1. Click the  Pay Runs menu.
2. Click the required pay run.
3. Click the Back payment tab.
   
   

   Helpful Hint

   You will now see a table of the back pay records you have marked as Complete in step 2.

   To read more about the fields and actions, you can refer to the Back payment tab in the Further information section.

   Please note that the Back payment tab item you need to view for this step is different from the Back pay table: columns and activities item. 

4. If needed, you can add a note under the Notes field.
5. Click the Actions dropdown.
6. Click the Apply button.
   
   

   Helpful Hint

   You can also apply the back payments in bulk. To do this, you can:

   • Tick the checkbox beside the name of the employees whose back payments you want to process.
   • Click the Bulk apply button.

   Important

   Once you apply the back payments to the pay run, the employee(s) back pays will display in the Other Earnings section of their pay. This is because the platform applies 1 unit of back pay as opposed to x hours of back pay owed. As the employee has already been paid for the hours they have worked, the number of back pay hours will not be applied at the rate difference to not over inflate leave accrued where leave is accrued on hours worked.

   Back Payment earnings are linked to platform-generated pay categories specific to back payments. Once a back payment has been applied, the back payment earnings line cannot be deleted from the employee’s pay. Instead, you will need to navigate back to the Back payments tab in the pay run and click on Actions > Undo.

   To read more, refer to System pay categories and Pay slip notes in the Further information section of this article.

This section explains the columns and activities that can be performed in the back pay table. Click on the action or column link you want to read about.

• Effective date
• Old pay rate
• Total lump sum
• Override
• Delete
• Save for later
• Export
• Add employees
• Complete

Effective date

The effective date is populated based on the employee’s anniversary date. This is the date entered in the Anniversary Date field from the employee details screen. If the anniversary date field is blank, the platform will apply the date in the employee’s Start Date field. In terms of the year that is populated, the platform will apply by default the most recent year that has passed prior to the pay increase being added to the employee’s Pay Run Defaults screen.

For example:

• An employee’s anniversary date is 12/6/2012
• The employer updated the employee’s pay rate on 10/4/2023
• The day and month used to determine the effective date will be 12 June, based on the employee’s anniversary day and month
• The year used to determine the effective date will be 2022, as that is the most recent year prior to the pay increase taking effect. 

There may be instances where the employee’s anniversary date is not the date the back pay starts from. If this is the case, you can override the employee’s effective date and then click the refresh icon so that the platform can update the total lump sum based on the new effective date. Another example where you may need to change the effective date is where there are 2 back pay records for an employee, for example:

The reason for there potentially being 2 records is that the employee would have received multiple pay increases during their anniversary period. In this instance, you may want to change the second record to a later date (if there is back pay to be processed). Otherwise, you can simply delete one of the records if they do not require any back pay.

In instances where the same effective date is to be applied for all employees in the table, you can override the first employee’s effective date and then click on the downward arrow. This will copy the same date across to all employees.

Old pay rate

The figure populated in this column is the pay rate that applied to the employee prior to being updated. If, for any reason, you want to change the figure entered in this field you can do so by clicking on the Override checkbox. This will open up the Old pay rate and Total lump sum fields thereby allowing the user to enter ‌a different old pay rate. Beware that the platform will not recalculate the total lump sum amount if the old pay rate amount is overridden. Instead, the total lump sum amount will also need to be manually entered. If you want to revert back to ‌platform-generated amounts, simply untick the Override checkbox.

Total lump sum

The amount populated in this field is the total back pay owing from the employee’s effective date up to the last pay run that the employee was paid at their old rate. Hovering your mouse over the tooltip info icon will display a breakdown of how the lump sum amount was calculated.



Please refer to the Notes on the calculation of the total lump sum item here in the Further information section to learn more.

Override

This functionality has been explained in the Old pay rate section. A further thing to note here is that when an employee’s back pay has been overridden, the tooltip showing the breakdown of the lump sum amount will be removed as it effectively no longer applies. As stated above, the override can be reverted to the original platform calculated values by unticking the Override checkbox. Refer to the pay categories section for further information on how overridden lump sum amounts are applied in the pay run.

Delete

You can remove a back pay record from the table by clicking on the bin icon to the right of the employee record. Before deleting, take note of the following:

• Although the employee will be removed from the back pay table, if you do a subsequent search for eligible back pays using the same date range, the employee will reappear;
• If you want to delete an employee because they have a $0 lump sum amount - this could be because the employee had no pay runs in the platform during the anniversary period or they had pay runs but the new rate was being applied from the anniversary date - rest assured that the employee will not appear in the pay run (this relates to step 3). For example, say the back pay table displayed the following records:
  
  
  
  The only employees that would appear in the pay run back payments tab would be Ashley Benton and Bianca Simos.

Save for later

At any stage, prior to completing the records, you can choose to save the record and access it again at a later stage. Keeping the record as saved, as opposed to complete, will not send the data through to the pay run. You can access the record again from the main Back Pay screen by clicking on the edit (pencil) icon.

Export

At any stage, whether the record is saved or marked as complete, you can export the details of the back pay record by clicking on the Export button. This will allow you to download an excel or csv export of the back pay details.

Add employees

Once you have completed an initial search of employees eligible for a back pay, you can choose to add more employees to the same back pay record. You may choose to do this to (a) obtain employees associated with a different pay schedule that could be eligible for a back pay and/or (b) obtain employees associated with the same pay schedule but choose a different data range.

Complete

Once you have reviewed the back pay records for eligible employees and are 150% confident that the records can now be processed in the pay run, click on Complete. Marking the record as complete signifies it is ready to be processed in the pay run and, as such, will lock the records whereby they cannot subsequently be edited. You cannot edit or delete a back payment after marking it complete. This means you need to make all required edits before clicking the Complete button. Once you click on Complete, the following modal will display:

This warning displays to clarify that the platform will not automatically process these back pays in the background. Instead, the back payment records will display when (a) the pay run associated with the employee’s pay schedule is subsequently created or (b) an adhoc pay run is created and the employees associated with the back payments are manually added to that adhoc pay run. In order to proceed, you must tick the I understand checkbox and then click Complete.

Take note of the following regarding the calculation of the total lump sum:

• The platform can only calculate back pay-off pay runs processed in the platform.
• Opening balances and historic gross earnings are not factored in when calculating back pay.
• Any earnings associated with fixed unit pay categories, such as bonuses, allowances, etc, are not factored in when calculating back pay.
• Earnings associated with the employee’s primary pay category and linked pay categories of that primary pay category are factored in when calculating back pay.
• Any paid leave earnings associated with the system leave based pay categories are factored in when calculating back pay. For more details, you can read the tab How does the platform calculate back pay on paid leave earnings? here in the Further information section.
• The system pay categories “Public holiday worked” and “Public holiday not worked” are not factored in when calculating back pay. For more details, you can read the tab System pay categories here in the Further information section.
• If an employee has been included in an adhoc pay run during the anniversary period, this pay run will be included when the platform checks for back pay. Similarly, if an employee has changed from one pay schedule to another during the anniversary period, earnings from both pay schedule pay runs will be included when the platform checks for back pay.
• When the employee’s effective date is mid-pay period, the platform will pro-rata the hours used for back payment. This is explained in further detail in the tab How does the platform pro-rata the hours owed for back pay? here in the Further information section.
• For employees who have a rate loading associated with their base rate of pay, such as casuals, the old and new pay rates will display their base rate, i.e., excluding the loading. However, the breakdown will be inclusive of ‌rate loading. Referring to the below screenshot as an example, the difference in old and new rates is $0.58 per hour. The rate used to calculate the breakdown, however, is inclusive of the loading, being $0.58 * 25% loading = $0.73.
  
  
  
  

Where back pay earnings are calculated by paying out the rate difference (ie new rate minus old rate) per unit previously paid, the back pay calculation of paid leave earnings will vary in certain scenarios. Specifically, if an employee’s leave is calculated and paid using the ADP, AWE or OWP (4 weekly) methods, this could mean that the rate paid for leave taken is higher than the employee’s base rate of pay.

In this instance, when calculating any back payment owing on leave earnings, the system will determine whether the leave rate that was paid to the employee during the back pay period was higher than the employee’s new rate of pay. We’ll use some examples to explain this is in more detail:

1. During the back pay period the employee took bereavement leave and was paid $30/hr (ADP). The employee’s new rate of pay is $25/hr. Because the new rate of pay is lower than the leave rate paid to the employee no back payment is owed.
2. During the back pay period the employee took 2 weeks of annual holidays and was paid $23/hr (AWE). The employee’s new rate of pay increased from $20/hr to $25/hr. As the employee’s leave earnings were higher than the employee’s base rate of pay ($20/hr) but lower than the new rate of pay, the employee would be owed $2/hr back pay per leave hour paid.
3. During the back pay period the employee took sick leave and was paid $20/hr (RDP). The employee’s new rate of pay increased from $20/hr to $25/hr. As the employee’s leave earnings were the same as their base rate of pay, the employee would be owed the full $5/hr back pay per leave hour paid.

The system automatically calculates leave earnings in the method discussed above when earnings are allocated to the following system leave related pay categories:

• Alternative Holiday Leave Taken
• Annual Holidays Taken
• Bereavement Leave Taken
• Domestic Violence Leave Taken
• Sick Leave Taken
• Covid Leave

We have discussed how the effective date is determined and how that effective date can be overridden. Because payroll is not always simple, there will be situations where an employee’s effective date does not fall on the start date of a historic pay run and instead is mid-way through such a pay run. In this scenario, the platform looks to pro-rata the hours that are owed back pay. This section will explain how the pro-rata of hours has been determined based on the different employee scenarios.

• Employees paid based on timesheets submitted: As timesheets are date-based and these dates are recorded in the pay run, when the platform looks to pro-rata back pay hours, it will assess timesheet earnings based on the date of such earnings. For eg, if the employee’s effective date was 4/1/23 and the pay run associated with that date had a pay period start of 2/1/23 to 8/1/23, the platform will pick up all timesheet earnings processed in that pay run from 4/1/23 onwards.
• Employees paid based on their advanced work pattern: Similarly to timesheet employees, employees paid based on advanced work hours are date-based in the pay run. As such, the same principle is applied as per timesheet employees. 
• Employees paid based on their basic work pattern: For these employees, we follow the same pro-rata principles as in other methods used in the platform.

This section explains the fields and actions that can be performed in the Back payment tab. Click on the field or column link you want to read about:

• Effective from, and Amount
• Notes
• Bulk apply
• Filter these employees
• Actions

Here is an example of what's in the Back payment tab:

Effective from and Amount

These values are populated from the records in step 2 and cannot be edited as the back pay amounts were marked as Complete.

Notes

You can choose to add a note that will apply to each back pay earnings line. This could simply be a record for the business or, if you have ticked Show line notes in the Pay Slips settings, this will also be displayed in the employee’s pay slip. Make sure to refer to the pay slip notes section of this article to see what employees will see on their pay slip. If you want to apply the same note to all employees, then add the note to the first employee and then click on the downward-facing arrow to copy the same note to all employees.

Bulk apply

Clicking on this button will bulk apply the back payments to the pay of the employee(s) whose checkbox (positioned to the left of the employee name) is selected. By default, all employees’ checkboxes will be selected.

Filter these employees

Clicking on this button will filter out all other employees, not subject to a back pay, that are in the pay run.

Actions

There are three options here in the dropdown, which will display based on where you are at with the back pay process). You can either:

• Apply the back payment in the pay run on an individual employee basis, i.e. Apply; or
• Choose to Mark as applied manually. Choosing this option will not apply the back payment into the employee’s pay, so you would select this option if some other back pay arrangement has already been processed or if the employee does not need to be paid the back payment. It also means that the employee will not appear in back pay search results (as per step 1) for the same pay increase.
• Choose to undo a back payment. This option will appear after you have applied the back payment. This action will be needed if you no longer want the employee to receive the back payment earnings and, as such, want to delete them from their pay.

In order to ensure back payments are taxed correctly as lump sum payments and that superannuation is automatically calculated, as applicable, we have added two new system pay categories, being:

• Back payment; and 
• Back payment (incl super)

By default, all back pay earnings will be allocated to the Back payment pay category. If back pay earnings are associated to a pay category that has the “Include for superannuation” checkbox ticked, then these back pay earnings will be allocated to the Back payment (incl super) pay category. For example, an employee is owed back pay for ordinary hours and weekend hours worked over a period of time:

The pay category “Permanent Ordinary Hours” is configured to include for superannuation, whereas the pay category “Permanent - Weekend” is not. When this back payment is applied in the pay run, the earnings will be split as follows:

Specifically, the back pay earnings associated with ordinary hours is allocated to the Back payment (incl super) pay category and the back pay earnings associated with the weekend hours is allocated to the Back payment pay category.

In circumstances where total lump sum amounts have been overridden in step 2, the platform will assign all back pay earnings for that employee to the Back payment pay category. This is because overriding the amount effectively also overrides the breakdown and so the platform does not know what components of the back pay to allocate where. If some or all of the back pay earnings should not be allocated to that pay category, then the user will need to first undo the back payment and then manually apply the back payment.

Manually applying the back payment will ensure the employee does not appear in subsequent searches from step 1. The user can then manually assign the back pay earnings to the other back pay pay category or use their own.

1. Log into your payroll classic platform.
2. Go to Payroll settings then Payslips
3. Ensure the Show lines setting is turned on to allow notes to display on the payslips.
4. Next, go to the payrun menu and select the pay run you want to look at.
5. From the Back payment tab in the pay run, you can add a note against the employee’s back pay.

Additionally, so that the employee has further detail on what the back payment consists, the platform includes the breakdown in the employee’s pay within the Notes for this Pay Run field, as per the following example:

These display in the Notes section of the employee’s pay slip, regardless of the business’ pay slip setting, but will only for non-overridden back pay records. If you do not want the employee to see this level of detail, you can delete the notes within the employee’s pay. 

If you have configured a pay schedule to be processed automatically, please note that any pay run containing back payments will not stop the automation workflow. As part of the workflow, the back payment(s) will automatically be applied in the pay run.