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Back pay

You might owe an employee back pay to account for a wage increase, or to make up for an incorrect pay rate.

Back pay is the difference between:

  • how much the employee should have been paid over the back pay period, and

  • how much the employee was actually paid.

Lump sum E payments

If the back pay accrued, or was payable, more than 12 months before the date of payment and is $1200 or more, the ATO classify it as a lump sum E. Learn more...

Before you begin

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    Work out the back pay amount, including any overtime or allowances owed

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    Use the Payroll activity report to work out what you've actually paid the employee

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    You'll find great info about back pay on the FairWork website

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    If the employee has had a pay rise, increase the employee's salary or hourly rate

Once you've worked out the back pay amount you can include it in the employee's next pay.

Set up the back pay payment

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To include the back pay on the employee's next pay, you'll need to create a Back Pay pay item. This pay item should already exist in MYOB, but you can set it up from scratch if needed.

  1. Go to the Payroll menu > Employees.

  2. Click the employee's name.

  3. Click the Payroll details tab > Salary and wages tab.

  4. Under Allocated wage pay items, click + Add wage pay item and choose Back Pay.

  5. If it isn't listed, click Create wage pay item and set up the pay item:

    1. Enter a Name, such as "Back Pay" or similar.

    2. Choose the applicable ATO reporting category. If unsure, check with your accounting advisor or the ATO. Learn more about assigning ATO reporting categories for Single Touch Payroll. If you choose Lump Sum E, also choose the Financial year the lump sum relates to. Learn more about lump sum E payments.

    3. Under Allocated employees, choose any additional employees who are entitled to back pay. By default, the pay item will be assigned to the employee

    4. Under Exemptions, choose any deductions or taxes that shouldn't be calculated on back pay. If unsure, check with your accounting advisor or the ATO.

  6. Click Save.

You can now pay the back pay.

Pay the back pay

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You can include the back pay in the employee's next regular pay.

  1. Go to the Create menu > Pay run.

  2. Choose the employee's Pay cycle, confirm the pay dates and click Next.

  3. Deselect the employee's you don't want to pay.

  4. Click the employee to open their pay.

  5. Enter the gross value of the back pay against the Back Pay pay item.

  6. If required, update the PAYG value to ensure the correct tax is withheld. For help working this out, speak to your accounting advisor or see this ATO information.

  7. Complete the pay as normal. Need a refresher?

After paying the back pay

You can remove the Back Pay pay item from the employee. If needed, you can re-use it later.

  1. Go to the Payroll menu > Employees.

  2. Click the employee.

  3. Click the Payroll details tab > Salary and wages tab.

  4. Click the delete icon to remove the Back Pay pay item.

  5. Click Save.