How to Set Up Retroactive Pay

This tutorial shows how to set up Retroactive Pay inside Payroll Mate® software.

Retroactive or back pay refers to income owed to an employee from a previous pay period. Retroactive pay may happen for a number of reasons, such as incorrect salary compensation or wages for hours worked, or a pay increase. Earnings are taxable payments to an employee that are separate from regular wages. The amounts are included in the wage base and used to calculate percentage-driven deductions such as 401(k). For income tax purposes, the IRS treats all retroactive pay as wages in the year paid.
https://www.irs.gov/publications/p957

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Summary of Steps

This is just a summary; please click “Download Tutorial” for detailed instructions with screenshots.

  • Click → Company from shortcuts
  • Click → Income Categories
  • Click → Add
  • Enter Title for income
  • Select Pay Type from dropdown menu
  • Review/Edit Taxes or Deductions applied as needed
  • Click → OK

You will need to apply the severance pay income to each employee as needed

  • Click → Employees from shortcuts
  • Select an employee from the list
  • Click → Edit
  • The Modify Employee Wizard will open, Click → Next until you are on the Incomes page
  • Checkmark to select Retroactive Pay income and enter pay rate as applicable, Click → Next until you reach the end of the wizard
  • Click → Finish to save
  • Repeat employee steps for each applicable employee
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