Whether to Reverse or to Adjust a Check

Use this rule for determining which run control to select:

  • If the check has not been cashed or deposited, run a reversal.

  • If the check has been cashed or deposited, run an adjustment.

When to Process a Reversal

A reversal is appropriate when you've produced a check that you subsequently realize should not have been produced at all, or should not have been produced how it was, and the check has not been cashed or deposited.

Examples:

  • An employee is terminated at the end of the last pay period and receives what should be her final paycheck.

    However, the Human Resources department fails to enter her termination into the system. So, when paysheets are created and processed for the next pay period, the system produces a paycheck for her. Her supervisor reports to the Payroll department that she has been terminated, and that no check should have been produced. The Payroll department runs a reversal on her check, backing it out of the system.

  • An employee's check mistakenly didn't include overtime.

  • An employee's check mistakenly included overtime.

  • An employee wasn't paid at the right rate.

  • An employee was taxed in the wrong state.

If the paycheck has not been cashed or deposited in any of these situations, you destroy the check, run a reversal, and issue an on-demand or online check for the correct amount.

When to Process an Adjustment

If the paycheck is not available in any of the previous situations—if it's already been cashed, or if it was a direct deposit—you perform an adjustment.

Example: An employee should have been paid for 20 hours of overtime, but deposited his check before realizing the overtime was not on it. He requests his overtime pay.

The adjustment process calculates the check as it should have been calculated in the first place and compares the new calculation to the calculation for the original check. In the example of unpaid overtime, you issue a single check for the difference. In some cases the employee might owe the company money, in which case you process a negative adjustment.

Note:

(CAN) When processing an adjustment, a Canada Pension Plan/Quebec Pension Plan pay period exemption may be applied in error to the adjustment cheque.