Understanding Retroactive Pay Rules

Payroll departments frequently need to adjust payments that were previously disbursed to employees. These adjusted payments, which are called retroactive payments, are usually made when salary adjustments are made effective on a date that has already passed. You can use the Retroactive Pay Rules program (P186701) to pay employees retroactive pay. The system uses these rules to determine how to calculate retroactive pay adjustments.

The Retroactive Pay Rules program simplifies the process of paying employees retroactively and reduces the chances for miscalculated amounts by automating the calculations. When you apply retroactive pay rules, the system:

• Determines which employees in an employee group are eligible for retroactive pay.

• Uses current and historical timecard information to calculate the retroactive pay that each employee earns.

• Creates new timecards for the retroactive pay adjustment.

For example, according to a newly ratified union contract, you might need to pay union laborers retroactively at a three percent increase for hours that were worked over the last month. Instead of determining which employees are union members and calculating each employee's pay manually, you can define a retroactive pay rule that the system uses to select employees, create timecards, and calculate pay automatically. After you have defined a retroactive pay rule, you can save it for future use. The payroll process is simpler and the output more consistent because you are using one set of criteria for all timecards.

When you create a retroactive pay rule, the Retroactive Pay Rules program uses the employee group, the date range, and the pay type inclusion criteria to determine which timecards are affected in the current and historical timecards tables. The system includes timecards from both tables and selects the timecards based on whether you select all timecards, timecards of certain pay types, or timecards of certain pay-type categories. The system selects the appropriate timecards from the tables to retrieve amounts and provide template information. The Retroactive Pay Rules program does not change historical or current timecards. Instead, it creates new timecards for the retroactive pay adjustment. The system ignores any original voided timecards. The parent or original timecard in either the current or historical timecards tables corresponds directly to the child or new timecard in the batch.

After the batch is processed, it is submitted to the Reviewing and Approving program (P186601). You use the Reviewing and Approving program to review, approve, or cancel the batch. You can also review the Retroactive Pay Rule Processing report (R186702) from within the Retroactive Pay Rules program.