Managing Retroactive Pay during Payroll Processing

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When running payroll, it is inevitable that mistakes will happen at some point or another. Whether the employee’s hours were reported incorrectly or a pay raise wasn’t added to the pay period, it is important that you take fast action to fix the problem. Employee satisfaction is tied to the accuracy of their paychecks. If you aren’t consistent with payroll, then you might be dealing with unhappy employees.

Retroactive PayrollWhat is Retroactive Pay?

When a mistake happens, it is necessary to remedy the situation and pay the employee the money they are owed. Retroactive pay is the process of adding the retro pay onto the next paycheck to compensate for any mistake on a prior paycheck.

Even if you have a good payroll system, you might be frustrated trying to calculate and add retro pay in the right way. Payroll computer programs often have certain checks and balances in place which prohibits you from simply changing the amount on the check. You need to be sure that the funds are accounted for so that the taxes are figured correctly and the reports are accurate.

When Should You Calculate Retro Pay?

There are many instances that might merit the calculations of retro pay. When you understand the right way to use your payroll system, you will be able to calculate accurately the amount of money that needs to be distributed.

Here are a few examples of when retro pay might be necessary:

  • Incorrect hour reporting for hourly employees
  • Miscalculated earnings for overtime
  • Wage increases
  • Bonuses
  • Commissions

Hire a Payroll Service to Help

Retro pay can complicate the process of printing paychecks, especially since it is important to calculate and withhold payroll taxes. These rates vary depending on the type of pay that is distributed. Instead of having the stress of keeping up with the payroll tax laws and other requirements on your own, it is much easier to hire a payroll company to help.

Are you ready to save time and money on payroll processing for your company? For more information about the benefits of payroll services, right now is a great time to contact R&R Payroll & Bookkeeping Services at (951) 296-0412.