Back payments are payments that were meant to have been paid in a prior period where an employee was entitled to this payment, including lump sum payments in arrears.
Examples of back payments include:
- Where wages or salary were underpaid in a prior period;
- An allowance that was due to be paid in a prior period; or
- A bonus that was due to be paid in a prior period.
When an employer is required to make an additional payment, the employer is required to calculate the amount withheld by either using method A or B.
Method A calculates an average withholding amount by dividing additional payments made in the current year over the number of pay periods in a financial year that is to be applied against gross earnings in the current pay period.
Method B calculates the withholding amount by averaging all additional payments made in the current year over the number of pay periods in a financial year, which is then applied to the average total earnings to date.
Click here for instructions on using method A and B with examples, types of additional payments and other relevant information.