# How to process backpay for an employee

KB123

### Overview

Sometimes employees are underpaid in either the rate or the number of hours. The type of backpay and the period over which someone is paid will determine the process and the payment type required on the pay item.

In some cases, back payments are gross or overtime payment types and in other cases, they may be Lump sum E payment type. Please check with your accountant or payroll professional to determine the correct payment type to be applied to the back payment. If Lump sum E is used as the Payment type the pay item description must contain the Financial year the payment relates to as the first 6 characters of the description, in the format of “FYXXXX”. For example - If the back payment relates to the 2020 financial year, the pay item description would read as follows “FY2020 Backpay”

#### If the employee was not paid the correct rate of pay

In this case, create (or use) a BACKPAYRATE Pay item. This pay item does not accrue leave.

- Type: Special income
- Default rate: Custom
- Rate: 0.00
- Tick Allow user to change rate
- Default quantity: Custom
- Qty: 0.00
- Unit: Each
- Tick Allow user to change quantity
- Payment type: Check with your accountant or payroll professional for the correct payment type to use. If “Lump sum E” is selected the pay item description must contain the financial year as the first 6 characters of the description (FYXXXX).
- Check "Leave item linking" is completely clear of ticks (no leave accrues when this is paid)

#### If the employee was not paid the correct number of hours

In this case, create (or use) a BACKPAYHOURS Pay item. This Pay item should accrue leave.

- Type: Special income
- Default rate: Employee hourly rate
- Rate: 1.00
- Default quantity: Custom
- Qty: 0.00
- Unit: Hours
- Tick Allow user to change quantity
- Payment type: Check with your accountant or payroll professional for the correct payment type to use. If “Lump sum E” is selected the pay item description must contain the financial year as the first 6 characters of the description (FYXXXX).
- Check "Leave item linking" to ensure all leave items are ticked to accrue leave for this pay item (leave accrues when this is paid)