How Retroactive Pay Is Calculated

Retroactive pay is the recalculation of prior payroll results due to changes that occur after the original calculation was run. To process retroactive pay, run the Recalculate Payroll for Retroactive Changes process. This process creates retroactive element entries based on retroactive events.

You can view automatically-created retroactive events or create them manually. Only elements that are set up to include a retroactive event group can have retroactive element entries.

Examples of prior period adjustments that could trigger a retroactive event are:

• An employee receives a pay award that's backdated to a previous pay period.

• The payroll department makes a backdated correction for an error that occurred in a previous pay period.

Settings That Affect Retroactive Pay

To enable retroactive processing of an element:

1. On the Event Groups page, review the types of changes that automatically trigger a retroactive notification for the predefined event group, which is called Entry Changes for Retro. You can edit this group or create a new event group for the element, if required.

2. On the Create Element: Additional Details page, select Yes for the following questions:

   • Is this element subject to proration?

   • Is this element subject to retroactive changes?

   The element template creates nonrecurring retroactive elements with the same attribution of the base element with a couple of exceptions. If you selected Process Separately or Pay Separately, the template creates input values on the retroactive element with a default value of N. You can override these values at the following levels:

   • Element

   • Element entry

   • Element eligibility

3. Select the predefined event group or a new group that you have created.

How Retroactive Pay Is Calculated

To process retroactive pay:

1. In the Payroll Calculation area, review or create retroactive events on the Event Notifications page. You can download results to Excel to view retroactive events in a report format.

2. Submit the Recalculate Payroll for Retroactive Changes process. You can use the Submit a Process or Report task, or the process may run automatically as part of your payroll flow. This process never overwrites historical payroll data. Instead, it creates one or more retroactive entries to receive the process results.

3. Run the Calculate Payroll process.

Note: Always run the Recalculate Payroll for Retroactive Changes process immediately before you run a payroll. If you run it after the Calculate Payroll process, retroactive adjustments are held over until the next payroll period.

If you don't get a retroactive notification that you expect to get, review:

• The originating transaction causing the event

• Element setup

• Element eligibility for the person

• The retroactive event group entities and attributes that are set up to trigger retroactive events

• The proration event group entities and attributes setup that triggers proration

Taxation of Retroactive Earnings

As of release 22B, all retroactive earnings are taxed as non-periodic earnings, as per legislative guidelines. This is the case even if the base earnings are regular, or have a tax processing type of regular.

Note: This feature is only available for new elements. When processing Absence elements that reduce regular salary, both the Absence and the Regular Salary elements must be new elements.

Taxation of Retroactive Earnings After TRU Transfers

When processing a TRU transfer for the same assignment, you can tax retroactive earnings based on either the source or the target TRU. These are options available for you to define how to tax retroactive earnings following a TRU transfer:

• Date Earned is 'Y' or Blank - Retroactive earnings are taxed based on the source (or original) TRU. This is the default.

• Date Earned is 'N' - Retroactive earnings are taxed based on the target (or current) TRU.

You can process negative retroactive entries in the target (or current) TRU after a TRU transfer. These negative entries are no longer ignored in the payroll process because of the association to the source (or original) TRU. For example, in the case where a TRU transfer occurs for a single assignment, and the TRU Rule for Retro Entries parameter has been set to 'N', the negative retroactive entries are processed in the target (current) TRU, and employees are no longer overpaid.

To change the existing default behavior to tax retroactive earnings based on the date paid, and use the target TRU, add the Process Configuration Group parameter TRU Rule for Retro Entries to the process configuration group you use for the payroll run.. Use the Payroll Process Configuration Group task, under My Client Groups, to add the parameter and override the value, if required.

Note: This feature doesn't support multiple assignment scenarios. It only supports TRU transfers of the same assignment.