Types of pay adjustments
Pay adjustments in Australia may be needed for various reasons. Understanding the different types helps ensure correct processing and Fair Work compliance.
Positive adjustments
- Underpayment corrections
- Back-pay for award increases
- Missed shift payments
- Salary reconciliation shortfalls
Negative adjustments
- Overpayment recovery
- Timesheet corrections
- Advance repayments
- Leave taken in advance
Processing underpayment adjustments
When underpayment is discovered, employers must calculate and pay the shortfall promptly:
Underpayment adjustment process
Recovering overpayments
Overpayment recovery must follow Fair Work requirements. Employers cannot simply deduct the full amount without proper process.
Overpayment recovery rules
Under Fair Work, employers can recover genuine overpayments, but the deduction must be authorised in writing, cannot leave employees below award minimums, and must be reasonable in amount per pay period. Discuss a repayment plan with the employee and document the agreement.
Annual salary reconciliation adjustments
Many Modern Awards require annual reconciliation for employees on annualised salaries. If the salary paid was less than what the employee would have received under the award, a pay adjustment is required.
- Calculate entitlement: Sum what employee would have earned under award (base + OT + penalties)
- Compare to salary: Compare award entitlement to salary actually paid
- Pay shortfall: If salary was less, pay the difference within 14 days
- Document: Keep records of the reconciliation calculation
Common pay adjustment mistakes
Not adjusting superannuation
When back-paying ordinary time earnings, super must also be adjusted. Forgetting super creates additional compliance issues.
Unilateral overpayment deductions
Deducting overpayments without employee agreement or in amounts that take pay below award minimums violates Fair Work requirements.
Poor documentation
Not keeping records of why adjustments were made and how they were calculated. This creates audit issues and makes disputes harder to resolve.
Delaying corrections
Waiting to process underpayment adjustments. Once an error is discovered, it should be corrected in the next available pay run.
Key takeaways
Pay adjustments correct errors or account for changes in employee wages. They may be positive (underpayment corrections, back-pay) or negative (overpayment recovery). Processing adjustments correctly requires following Fair Work requirements, adjusting super where applicable, and maintaining clear documentation.
Minimising pay adjustments starts with accurate time tracking and correct award rate application. RosterElf's integrated system reduces errors by capturing actual hours worked and automatically applying correct rates for seamless payroll processing.
