Create Adjustments using a Lump Sum Pay

Overview

If an employee’s pay is incorrect, can’t be adjusted using a timesheet adjustment, and has been submitted through STP, you will need to process any adjustments using a lump sum payment.

Some common scenarios where a lump sum payment can be used for an adjustment are:

• Pay amounts or Pay Items used are incorrect;
• Pays have been processed against the incorrect entity;
• Pays have been processed using the incorrect tax table;
• Pays have been processed incorrectly as an ETP or using an incorrect ETP code.

To create an adjustment for an incorrect pay, you will generally need to process two lump sum pays.

• The first lump sum payment is used to reverse the original amounts and should include the pay data that was incorrect as negative values.
• The second lump sum payment is to reprocess the payment, with the corrected pay data recorded as a positive amount.

For example, if an employee was paid 10 units at $20.00 per unit but should have been paid 5 units at $25.00 per unit:

• the first lump sum payment would reverse the 10 units at $20.00 (ie reverse the incorrect Pay Item and amount);
• the second lump sum payment would include 5 units at $25.00 as this is what should have been paid to the employee and reported through STP.

Reversing and reprocessing pays will not automatically create an invoice adjustment. If the adjustment can be processed in a timesheet, this is best practice.

Adjust Pays Processed Against the Incorrect Entity

It’s important to note that negative values are not accepted in SAFF files. You will need to contact the clearing house or super fund directly to ensure that any super amounts are reported under the correct entity. We recommend doing this prior to processing the adjustment.

If an employee has been paid under the incorrect entity, you will need to reverse the amounts that were paid to the incorrect entity. To do this:

1. Ensure that the incorrect entity is set on the employee profile. Go to Users > Employees > select the employee > Employment > select the incorrect entity (the entity that the original pay was processed against) in the Pay Through drop-down > Save.

2. Create the lump sum payment. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria.

3. Click Add Lump Sum Pay, then complete the fields in the popup window and click Add Lump Sum Pay.

4. Expand the employee pay in the Process Payroll report. Add items to the pay and make any adjustments that are needed. You’ll need to ensure that you use the exact pay items that were processed in the original, incorrect pay.

5. Enter the Units as negative values to reverse what was paid under the incorrect entity. You will need to manually overwrite the tax value that calculates with the actual value you need to reverse.

6. The negative values will create a recoverable deduction. You can add this to an existing pay run or create a new pay run for processing.

You will need to repeat the above process for each employee whose pay needs adjusting. We recommend including all negative adjustments in one pay run.

1. Once you have reversed the incorrect amounts, you will need to create another pay run to reprocess the pay in the correct entity.

2. Go to Users > Employees > select the employee > Employment > select the correct entity in the Pay Through drop-down > Save.

3. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria > Add Lump Sum Pay.

4. Complete the fields as required and ensuring that the Start and End Dates match those in the original pay, then click Add Lump Sum Pay.

5. Expand the employee pay in the Process Payroll report and add items to the pay

6. Enter the Units as a positive number to offset the amount that was reversed in the previous pay run.

7. Check the values of each item added to the pay match the figures that were adjusted in the negative pay run. The total of this pay run should offset the total of the reversal pay run. You may need to manually overwrite the tax value so that it matches the tax figure in the negative pay.

8. Once the amounts are confirmed, tick the checkbox to select the employee pay and add them to an existing pay run or create a new pay run.

Adjust Pays Processed Using the Incorrect Tax Table

If an employee has been paid using the wrong tax table, you can process the adjustment by following the steps below:

1. Go to Users > Employees > select the employee > Tax & Super > ensure that the incorrect tax table is set in the Tax Table drop-down > Save. This should be set as the tax table which was used in the original pay run.

2. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria > Add Lump Sum Pay.

3. Complete the fields with the relevant information for the first pay item you need to add, then click Add Lump Sum Pay.

4. Expand the employee pay in the Process Payroll report. Add items to the pay. Ensure that you are using the exact items that were used when the amounts were originally processed in the incorrect pay.

5. Enter the Units for each item as a negative value to reverse out what was paid to the employee under the incorrect tax table. You may need to manually overwrite the tax amount to match what was taxed in the original pay.

6. Ensure the negative values will not take the employee’s YTD earnings into negative.

If the employee was undertaxed, this process will create a recoverable deduction which will need to be added to a pay run and processed through to a Paid status.

Once the reversal has been processed, follow the steps below to process the pay using the correct tax table:

1. Go to Users > Employees > select the employee > Tax & Super > select the correct tax table from the Tax Table drop-down > Save.

2. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria > Add Lump Sum Pay.

3. Complete the fields, ensuring the Start and End dates match the original pay period, then click Add Lump Sum Pay.

4. Expand the employee pay in the Process Payroll report. Add items to the pay.

5. Enter the Units for each item as a positive number to offset the amount reversed in the previous pay run.

6. Check that the values offset the figures that were adjusted in the negative pay run. The total of the positive pay run should balance the total of the negative pay run. You’ll need to check the tax amount that calculates and overwrite this field in line with the correct tax table, if necessary.

7. Once the amounts are confirmed, select the employee pay and add it to an existing pay run or create a new pay run.

Adjust Pays Processed Incorrectly as an ETP

If an employee has been paid using an incorrect ETP code, you can follow the steps below to reverse the original payment and reprocess it using the correct ETP code.

Before you process the adjustment, ensure that any pending timesheets are finalised and processed through your normal payroll process. You can also run your payroll reports to determine the amounts that need to be reversed. 

1. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria > Add Lump Sum Pay.

2. Search for the employee, then complete the fields as required, ensuring that you select the ETP Code that was incorrectly assigned in the original pay, then click Add Lump Sum Pay.

3. Set the lump sum pay with the same Pay Date as the original ETP was processed. Tick the checkbox to select the pay, then click Create Pay Run > select Recalculate Selected > edit the Pay Date > Apply.
   IMPORTANT: If a different Pay Date is used to the original, additional negative records will be created in the STP data, which will fail validation. 

4. Expand the employee pay in the Process Payroll report and add the other items included in the original pay. You will need to ensure that you use the exact items that were used when the amounts were originally processed in the incorrect pay.

5. Check that the Units for each item are negative to reverse out what was paid to the employee under the incorrect ETP code. You may need to manually overwrite the tax amount to match what was taxed in the original pay.

6. The negative values will create a recoverable deduction. You can add this to an existing pay run or create a new pay run for processing.

You will need to repeat the above process for each employee whose pay needs adjusting. We recommend including all negative adjustments in one pay run.

Once the reversal is processed, create another lump sum payment to enter the pay against the correct ETP code.

1. Go to Payroll > Process Payroll > Process Payroll > select the Pay Cycle or set the Report Settings criteria > Add Lump Sum Pay.

2. Select the employee and complete the fields as required, setting the correct ETP Code from the drop-down, then click Add Lump Sum Pay. Set the ETP Code field as ‘Not applicable’ if the payment shouldn’t actually be processed as an ETP.

3. Expand the employee pay in the Process Payroll report and add any other items to the pay. Ensure that you check the tax amount that calculates and overwrite this manually if you need to.

4. Once the amounts are confirmed, select the employee pay and add it to an existing pay run or create a new pay run.