Processing a backpay for unpaid Annual Leave Loading in Payroll Premier

Legacy KB ID: 4708

Question

I have just discovered that Annual Leave Loading was not paid to employees recently.  What do I need to do to pay them this outstanding amount and adjust pay record in Payroll Premier?

Answer

You must adjust the original pay to include the correct amount to ensure that all relevant registers are updated properly and that transactions and amounts are included in Reports correctly.

The changes made must also leave Net Pay of the original transaction unchanged. 

These notes apply to pays for the current financial year.  If the amounts relate to a previous financial year you should consult your Accountant as there may be other issues involved. 

 

Detailed Instructions

 Create the following payroll items:

·         Deduction:  Leave Loading Withheld; set to Tax Exempt Deduction and Type: Professional Org

·         Allowance: Backpay Leave Loading; set to Fixed Amount and to Display in Gross in Payment Summary

In the Employee Record, Leave tab, enter the rate of Leave Loading (17.5).

Open the first pay record:

1.    Take note of all original details;

2.    Click on Edit this Pay;

3.    Remove the Annual leave item;

4.    Re-input the Annual Leave Item – see that the Amount field will increase from the Normal Hours and after hours are entered, Gross, Tax and Net will change;

5.    Take note of the change in Gross from the original amount to the new amount;

6.    In the Deduction tab, add the Leave Loading Withheld item for the difference amount – Ex Tax must be set to Yes.  Note that:

a.    Tax and Net reduce to the original amounts;

b.     Gross minus Deduction equals the original Gross;

7.     Click OK to process the pay;

8.    Repeat these steps for all pays  and employees concerned. 

Pay the employee the backpay amount:

You can process a separate pay run for the backpay or you can include the backpay on the next normal pay:

1.    Prepare the normal pay.  Take note of all the details;

2.    In the Allowance tab add the Backpay Leave Loading item for the total amount of deductions added to previous pays for the employee;

3.    Click OK to complete the pay preparation;

4.    Repeat these steps for all employees involved.

You can now process this pay. 

You will need to make appropriate adjustments in your Accounting system to mirror these changes in Payroll Premier.

You should document these adjustments on the employee record (Notes tab). 

 

Additional Information

Please note that from 1/7/2012, tax concessions for Annual Leave Loading were removed so that Leave Loading is fully taxed at the employee’s marginal rate of tax. 

 

 

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