We have had a number of queries regarding how to process corrections for employees due to errors allowances being set incorrectly throughout the financial year
Included in this document is information regarding how to make the adjustments for the following scenarios:
- Adding an out of sequence correction to add or reduce an employee's gross wage.
- Correcting an allowance that was processed as the wrong type or PAYG location
Adding an out of sequence correction to reduce an employee's gross wage.
You may have a scenario where you have accidentally overpaid an employee, the employee has paid you the money back however you need to correct the amount through the system. To do this you will need a YTD Before Tax Deduction.
The YTD Deduction allowance types are used to deduct amounts from the employee YTD amounts outside of the standard earnings within the pay run itself, ie the employee could have no earnings within the run but the deduction can still be shown. The only restriction of these allowances is that the employee needs to have already earned said amount within the financial year.
Conversely, if you have an employee that has been paid an additional amount outside of the payroll sequence and you need to include this value to the employee's gross without affecting things like the Tax or Super calculations you can use a YTD Befoe Tax Allowance.
Use the steps below to create the allowance to make the correction to the employee's gross amounts.
- Generate a payroll, keeping in mind that the Payment Date needs to be within the financial year in which you need to make the adjustment.
- The Allowance Rules screen will now show, click the Add button to create a new allowance, then set the Name for the allowance as well as the Process As option to use either the YTD Before Tax Deduction or YTD Before Tax Allowance type depending on the needed condition.
- Click the Save button to confirm the changes
- On the Payroll screen, locate the allowance under the Gross Allowances / Deductions section and enter the value of the deduction in the value field to the right.
Correcting an allowance that was processed as the wrong type or PAYG location.
If in the event that an error has been made with an allowance that has been previously processed
Some common errors that may occur include the following
- An allowance was processed as a PAYG Allowance and as such is showing separately on the PAYG certificate.
- An amount should have been processed through to Union Fees rather than Gross Wages or Salary
- An allowance was generated as an after-tax allowance when it needed to be included within the gross wage.
To correct these items you will need to do the following;
- Create an allowance to deduct the values from the original amount that was processed with the error
- Create an allowance to re-add the amount with the corrected settings.
- Update the original allowance with the corrected settings.
As an indication of how this is to be done please see the example below in which an employee was paid an amount of $1000 to the Allowances PAYG Location (shows separately through STP and on a PAYG summary) rather than allocating the amounts to the employee's Gross payment amount.
- First generate a payroll, keeping in mind that the Payment Date needs to be within the financial year in which you need to make the adjustment.
- Add a new item and set the values to be identical to that of your original allowance, with the following exceptions.
- Set the Name to reference that this is a YTD correction for example "YTD Gross Deduction"
- Set the Amount to the full value that you want to correct, and set the period to calculate per Pay Period.
- Set the Process As value to YTD Before Tax Deduction.
- Under the Options drop-down, enable the Pay In Next Pay Only.
- Repeat the process to add an additional allowance with the following differences
- Set the Name to reference that this is a YTD correction for example "YTD Gross Correction"
- Set the Process As value to YTD Before Tax Allowance
- Change the PAYG Location to Gross Wages or Salary.
- Going forward we want to ensure that future allowances will be processed with the corrected, make the corrections on the original allowance, in this case, it is to change the PAYG Location from Allowances to Gross Wages or Salary.