And these errors are often not caught until after timesheets have been submitted. We highly recommend that you never
delete an employee payroll transaction after paying an employee. Say
you need to change a deduction or addition amount on a paycheck that has
already been distributed.

• Administering and calculating employee bonuses effectively is a great way to motivate and reward employees.
• Although demotion-related pay adjustments are difficult to navigate, they are necessary to maintain pay equity in the company.
• Merit raises are often scheduled after yearly performance reviews.
• For example, you may have incorrectly classified an employee as FLSA-exempt.

Training is now available for AdjustPay, an online application that USPS managers and supervisors use to electronically authorize payroll adjustments for employees. Summarize the wage and deduction information for each employee in a payroll register, which you can then summarize to also create a journal entry to record the payroll. This document is automatically created by all payroll software packages.

What should I do if an employee asks for a pay adjustment?

They can be influenced by external or internal factors, and they can be proactive or reactive depending on the circumstances. These changes to compensation, which can be for a single employee or many, are called pay adjustments. And on top of that, he is also recognized for being an exceptional team player. In recognition for being such an asset to the company, you’ve been thinking of giving him a salary raise and a job promotion that he so deserves. However, being the owner of a very young company, it is your first time to award a job promotion to one of your employees.

• Human Resources professionals involved in overseeing the adjustment process should understand why payroll adjustments are important and how the process works.
• This allows you to double-check whether the change is feasible for the company’s finances.
• If your employee is under contract or belongs to a union, you may not be able to make any pay adjustments.
• Similarly, you should review your initial employment contracts to make sure that your adjustments aren’t violating any terms you may have agreed to when you hired them.

So you consulted the matter to one of your HR specialists and found out that you lacked the essential document for that purpose, the Payroll Adjustment Form. TriNet offers an extensive offering of payroll related and HR services that helps make payroll processing easy. Our payroll experts can help small and medium-size businesses stay on top of payroll compliance issues. Payroll adjustments must comply with all relevant federal, state and local laws.

Pay adjustments need to be managed differently depending on the reason for the change and whether it’s an increase or decrease. Still, there are some period costs basic steps involved in every pay adjustment. You have a model employee that needs to be awarded and recognized for the exemplary work he has done.

Following a fair and well-documented procedure should help ensure the process runs smoothly. Further, it is important to understand the relevant laws surrounding pay adjustments. If you are unsure about any of these legal requirements, it is a good idea to seek independent legal advice. When a worker receives a demotion, they may also receive lower compensation to reflect their new position. As demotions are often difficult for both employees and businesses, you may want to seek legal advice when making such pay adjustments.

You may decide to adjust an employee’s pay based on factors related to their individual circumstances. Alternatively, wider economic conditions may be a factor when determining a change in pay. Some of the most common reasons for making a pay adjustment include the following. Once you know why and how much you’re adjusting, make sure you notify the employee’s managers and check for payroll compliance.

Step 2: Communicate with Relevant Leadership and Supervisors

Payroll software like Hourly makes it easy for management or human resources to set up adjustments whenever you need them. In some companies, it’s not unusual that part of the employees’ salary is variable, or in other words, based on achieving targets such as sales. A payroll adjustment software enables you to assign variables for a certain period of time, both on an individual basis and for each department. Having to make changes to employees’ payslips from month to month isn’t unusual in business today.

Reasons to make a pay adjustment

Here’s a quick guide to making pay adjustments, why you might use them, and how to set them up. Monitoring leavers is also important as you may need to calculate any end of contract adjustments such as unused annual leave and other outstanding payments. It’s vital to record the exact date the contract terminates to adjust the final payslip. Any updates to employee contracts, such as a salary increase, must also be reflected in their payslip.

What is Payroll Accounting?

If an employee performs to an exceptional standard, you may reward them with a merit increase. You can do this on an annual basis, following a performance review, or based on their contribution to individual projects. Whether your state requires it or not, notifying the employee in writing is a good rule of thumb. Letting your employee know can help avoid confusion and frustration. Not to mention, putting it in writing—and getting your employee’s authorization—can act as documentation.

These types of pay adjustments are sometimes paired with a job title change. A pay adjustment is an increase or decrease in an employee’s salary or wage. Pay adjustments can be temporary, but they are not one-time changes made for payroll mistakes. As mentioned above, employers make payroll adjustments for their employees because they want to reward an employee for exemplary work. Rewards are awarded to an employee for one purpose, and that is to motivate them to do better in the future.

What is a payroll overpayment?

So, for this reason, it’s essential to have the right tools at hand for managing payroll adjustments. We look into the most common payroll adjustments and how a customised HR software can make your life easier. Whatever your reason is to adjust an employee’s pay, make sure it is well defined.

This may involve either increasing or decreasing an employee’s compensation. Set up the overpayment deductions like a post-tax deduction, not a pay decrease. This means that you’ll withhold the overpayment collection after withholding taxes from the employee’s pay.