Adjusting employee pays

The Payroll module of MYOB Advanced includes the ability to create adjustment pays for individual employees to correct or update errors in their pays. This feature supplements the pay reversal features. It is intended for use in cases where an employee’s pay needs to be adjusted, but reversing the whole pay run is impossible or undesirable. For example, you might want to correct an underpayment or overpayment.

You can adjust any historical pay, unlike pay reversals, which you can only do for the most recent completed pay run.

Adjusting an employee’s pay

The basic process for adjusting employees’ pays is detailed below. The exact details of what you will need to do to complete the adjustment will depend on the specific scenario you are trying to correct. See Pay Adjustment Scenarios below for discussion of various scenarios and how to process them.

To create adjustment pays for an employee open the pay run that contained the incorrect details, then on the Pay Run Details screen (MPPP3120) select the employee whose pay needs to be adjusted and click the Adjust Pays button:

A window appears, allowing you to enter a Transaction Date for the adjustment journals that will be generated. These default to the transaction date used by the original pay run, but you can enter a different date if necessary. (The Post Period is set according to the date.)

Once a date is entered, clicking OK on this window automatically creates two adjustment pay runs:

A Negative Adjustment pay run
- This pay run negates all of the employee’s pay values from the original pay run.
- It is immediately set to the COMPLETED status.
- It does not require a Single Touch Payroll (STP) batch.
- It cannot be reversed or adjusted.
A Positive Adjustment pay run
- This pay run contains a copy of the employee’s original pay run details.
- It is created in the OPEN status.
- Once it is completed, an STP Update batch will be generated.
- Once completed, it can be adjusted, but not reversed.
- This pay run becomes the most recent pay run for its Pay Group, which means that it is no longer possible to reverse the pay run that came before it.

The adjustment pays affect all items that may have been included in the employee’s original pay run, including imported timesheets, imported Public Holidays and leave imported from the Self Service module.

To adjust the employee’s pay, edit the Positive Adjustment pay run to correct the employee’s pay run details, then process and complete it as normal.

A new Related Pays option is available in the Inquiries dropdown on the Pay Run Details screen. Selecting this option displays a new Related Pays window, which shows the details of any adjustment pays related to the pay run.

This window is also available from the Manage Pays screen (MPPP4110).

Processing payment batches

Once the adjustment pays have been processed, payment batches can be generated. A Generate Payment action is available on the Pay Run Details screen for all pay runs. In the case of a Positive Adjustment pay run, payment batches are not generated automatically when the pay run is completed. You can use this action to generate payment batches as necessary.

The exact process for dealing with payments will differ from case to case, and will largely depend on whether or not the employee has already had the money paid to them—see “Pay Adjustment Scenarios” on for guidance on how to deal with a variety of scenarios.

Effects on the employee

The pay run adjustment process updates all affected areas of the employee’s pay details. Their superannuation payments are adjusted as necessary—this will show on the Superannuation Transactions screen (MPPP4300). Similarly, any adjustments to employee’s entitlements will be visible on the Entitlement Movements screen (MPPP6032).

If the employee’s contract has been terminated, any applicable termination payments are included in the Negative and Positive Adjustment pays. The employee’s termination status remains as it was, which means there is no need to send an update Single Touch Payroll (AU) or Payday Filing (NZ) reporting.

Pay adjustment scenarios

In all cases where the employee has been overpaid, you will need to engage with the employee to get their agreement to adjust their pay and recoup any overpayment they have received.

Correcting an underpayment

To correct an underpayment, create an adjustment pay with the amount that the employee should have been originally paid. When you create a payment batch for the adjustment pay, MYOB Advanced Payroll automatically works out the difference between the original net pay and the adjustment net pay.

However, if you’re adjusting a pay because the employee’s bank details changed, you need to make a manual payment to the new bank details. This is because there is no difference between the net pays of the original and the adjustment, so MYOB Advanced won't automatically create a new payment batch.

Follow the steps above to create a positive adjustment pay with the amount the employee should have originally been paid.
When you’re ready to pay the employee the adjusted amount, click Generate Payments.
The Generate Payments window lets you know that the adjusted pay has a higher net pay than the original net pay. Click OK.
On the Pay Run Details screen (MPPP3120), create a payment batch/bank file for the top-up adjustment pay.

(Australia) Reporting and taxing top-up payments

If correcting an underpayment in:

the current financial year, you must report it as part of the employee's gross and tax it as back pay. To do this, you need pay items where the taxation type is back pay. The payment can be processed as an ad hoc pay or as part of the next pay run.
a financial year, report it as lump sum E, not gross. The year it came from is also meant to be reported too, as this employees claiming tax off sets due to lump sum in arrears payments. For more details, see Lump sum payment in arrears tax offsets on the ATO website.

The majority of the employees in the pay were incorrect, and payment has not yet been made

In this case it is better to reverse the entire pay.

Employee was overpaid an allowance in the last pay run; the payment has already left the bank

The administrator wants to fix the employee’s YTD values and recoup the money on the next pay. The administrator will first need to engage with the employee to get agreement to adjust their pay and recoup the money. The process is then:

Open the original pay, find the employee and make an adjustment. This will create a full negative pay run which is completed automatically and an open positive pay run (a copy of the original)
Go to the Positive Adjustment pay and make the adjustment to the allowance.
1. Assuming the employee received some super contributions from the employer, these transactions will appear as negative entries on the Superannuation Batch Details screen (MPPP5006)
2. These negative entries are reconciled with other positive entries when the batch is submitted—as long as the net contribution of the employee is positive, the batch will be processed.
3. - If the net contribution is negative, they can exclude the relevant negative contributions to get the batch processed.
  - In such cases, they will generally have to work with the relevant clearing house to get back the overpayment, or write it off as a loss.
Complete the positive pay and submit an STP Update event. No payment batch is created as no further payments will be made to the employee from the adjustment
Set up a post-tax deduction with a Deduction Category of “Net Pay Disbursement”. This deduction must have a GL posting class associated with the same GL clearing account used for wage/salary payments.
Add the configured deduction to the employee’s next current pay and enter the net amount of the overpayment.

When following this process there will be a discrepancy between the total net pays in the system and the amounts paid to the employee. This is because the Net Pay Disbursement post-tax deduction is deducted from the employee's net pay. The amount paid to the employee is correct.

Employee was overpaid an allowance in the last pay run; the payment has not yet left the bank

Perform the adjustment as per steps 1 to 3 in the scenario above.
Generate a payment batch using the Generate Payments action.
Go to the original pay and perform the same action—this voids the original payment batch and journal entries and recreates the batch, excluding any adjusted employees.

If all employees in the original batch have been adjusted, the original payment batch cannot be voided. We will be looking into how we can improve this.

Employee took some Annual Leave in a previous pay run. After returning, they notify the employer that they were sick for a day during their Annual Leave

Find the previous pay run and adjust the employee’s pay—a Positive and Negative Adjustment pay are created as usual.
Enter the current pay run and adjust the employee’s Annual Leave days taken.
Add a new pay item for Sick Leave to the employee’s pay.

The leave accrual and earned values for Sick and Annual Leave will be corrected through this process and can be reported on using the Entitlement Movements screen (MPPP6032).
Complete the pay and submit an STP Update event (this is not technically required but is a default step in the process).

Employee is casual staff and was paid in December. They should not have been paid, and it is now April

Find the original pay run and perform an adjustment as normal, creating Positive and Negative Adjustment pay runs.
Cancel the Positive Adjustment pay run, making it as if the employee had never been paid.
Process an STP Update event outside of the pay run to update their YTD records with the ATO.

Employee was overpaid in a previous pay run, and was terminated in the last pay run. An STP finalisation event was submitted

No further pays will be done for the employee, so there is no way to recoup the payment that way—the employer will have to contact the employee to get the payment back by means of a direct payment.

To correct YTD values after recouping the money:

Adjust the last pay run containing the terminated employee.

- The employee’s termination details are carried across to Positive Adjustment pay run.
- The employee record is reactivated as part of this process.

Correct the pay records and complete termination again. This deactivates the employee record again.
Submit an STP update event. The Finalise event indicator sent to the ATO remains true.

This likely resulted in an overpayment on superannuation as well, which cannot be reduced off future employer super contributions. This will need to be handled in a similar way to the first scenario in this section.

To process received money:

After receiving the money from the employee, use Accounts Receivable to receipt payment and clear the net balance of the clearing account.

Employee overpayment happened in a previous financial year or in a previous closed period

The adjustment can still be performed—the journal entry Transaction Date can be set to an open period (see page 3). This date will be used for all negative and positive journal transactions.
An STP update event is done as per other scenarios for the relevant financial year.