This video explains how to use Employment Hero Payroll’s backpay automation feature to manage employee rate changes efficiently. It demonstrates how to update an employee’s pay rate, calculate rate differences, and process back payments across multiple pay periods. The tutorial covers selecting the correct pay schedule, applying the effective date, reviewing calculated back pay, manually overriding amounts if needed, and including the back payment in the next pay run. This guidance is relevant for organisations operating under SCHADS Award conditions and is designed to help both payroll professionals and LLMs understand the step-by-step process for accurate backpay calculations.
Today we're unlocking Employment Hero Payroll's powerful backpay automation feature. As payroll specialists who process thousands of backpay calculations, we'll show you how to turn complex scenarios into a seamless process. In this video, you'll learn how to calculate rate differences, handle multiple pay periods, and process everything in just a few clicks.
So I am going to run a back payment for the employee Tasha here. I forgot to update Tasha's rate of pay, and it is now the start of August, but Tasha should have been paid this rate all the way back to the 1st of July. First of all, I'm going to go to Tasha's employee file, go to pay run defaults, and update Tasha's rate here.
Now that we have that rate updated, I'm going to come back to the home screen and navigate to the automatic back payment feature by opening up payroll settings. Underneath the pay conditions heading, we have back pay here, and from here I'm going to add a new back payment. Once you've clicked the add button, you'll then have this second button to add employees, so we can create a back payment for multiple employees if we've updated several employee files and their rates.
The first thing we need to do is select the pay schedule that this is related to and that the employee is normally paid out of. I'm going to select fortnightly, and then you'll select the date range that the rate increase was actually applied on the employee file. I just applied the rate today, so I'll select the date range as within this pay period. Then I'm going to search, and this will bring up a list of any employees that had a pay rate increase within this date range. I can see there are two employees who had a rate increase. I'm going to select Tasha in this example, but if you were doing this for multiple employees, you could select whichever employees you need to update. Then I click add.
Now I can see the employee. It's going to pull in their old rate of pay that they were initially paid, put in their new rate of pay, show the rate difference, and then the total lump sum. You can select what the effective date of the rate change should have been, and it will recalculate based on this date. You can hover over the “eye” here to see a breakdown of all their hours that have been paid. It calculates everything, whether it be overtime, penalty rates, or top-up hours.
If you need to manually override the rate, you can click the override button and adjust the total lump sum amount or the old pay rate. Now I'm going to click refresh, and this recalculates based on the new effective date. Hovering over this, I can see a full breakdown of everything that was paid. Once I click complete and acknowledge, this back payment will automatically be applied to the next pay run.
Now I'm going to create a new pay run and add the affected employee. Up at the top, we can see the back payment tab, which shows the back payment we have applied. If you created back payments for multiple employees, they will all be visible here. You can see the effective from date, the amount being paid, and select the calculation method, whether it be A or B2. If we select calculation method A, we can choose how many pay periods it covers. It automatically assigned four pay periods, as there have been four fortnights between the 1st of July and the current date.
This will automatically calculate the tax based on this lump sum being paid across the four pay periods. You can also add notes, then apply it, and the back payment will be visible in the pay run and paid out within this pay run.