Component documentationCorrection Run

 

This component enables you to make an immediate correction payment if an employee’s master data is changed effective from a past period after successful completion of regular payroll run. The employee does not have to wait until the system automatically carries out retroactive accounting with the next regular payroll run.

For example, an employee receives the pay check for April and discovers a discrepancy in the payments made to him due to incorrect calculation of basic pay. He does not want to wait until the next regular payroll run to receive the corrected amount. In this case, you can run a correction payroll run.

The following comparison is to help you choose whether you must execute a correction run or offcycle run in a given scenario:

Different statutory bodies have a predefined time limit within which statutory contributions or deductions should be deposited with relevant authorities. Validate the feasibility of performing the corrections once the defined time limit is expired. Also, you must resubmit the required documents to the authorities in case you perform a recalculation.

Features

When you perform correction payroll run, system triggers retroactive payroll run from the date of earliest master data change. In addition to the retroactive accounting payroll results, the system also creates an original payroll result for the payment date on which you perform the correction payroll run.

For example, if we run a correction payroll for an employee for April on May 5, the system will perform the following payroll runs:

  • For April on May 5.

  • For May 5, on May 5.

Note Note

You can execute correction payroll during a date that falls after the payment date of the latest run payroll period. For example, for pay period April 2009, which has the payment date as April 30, 2009, you must execute the correction run after April 30, 2009 (inclusive).

End of the note.

Performing correction payroll run

To perform correction run for a period for which payroll is executed and exited, you must perform the following activities:

  • Activate the correction run functionality. You need to activate this functionality only the first time you run correction payroll.

  • Make the required master data changes that are effective from past.

  • Run retroactive payroll by selecting reason as Type B, for the relevant periods. The system then performs:

    • Retroactive payroll run from the date of earliest master data change.

    • Regular payroll run for the date on which the correction run is performed.

Payroll processing

When the retroactive payroll run is triggered because of correction off cycle payroll run, complete gross to net computation is performed just like a normal retroactive processing. This is to ensure that the recomputed payments, deductions and contributions are updated during this retroactive payroll run, considering the modified master data.

For example, employee A receives a House Rent Allowance (HRA) of INR 10000 per month till April 2008. In May 2008, his salary is revised with effect from April 2008 and his HRA becomes INR 12,000 per month. Since the payroll for April is already executed and exited, on May 5, 2008, you trigger a correction run for April. In this case:

  1. Payroll for April on May 5 will be processed with updated value of HRA as 12000.

  2. Accordingly the relevant payments or deductions, contribution will be modified for example net pay.

  3. The difference is calculated, during the retroactive processing and c/f to regular payroll run on May 5.

Income tax

The processing of change in Income Tax calculated due to a correction payroll is different from rest of the payroll components. During the retroactive processing triggered due to correction run, the old values for Tax wage types are retained. The change is not reflected at this stage. During the regular run for the date on which the correction run is performed:

  • The difference amounts are reflected for relevant annual wage types.

  • Accordingly the monthly IT calculated for previous month is revised. From this amount the IT that is already deducted and paid to the government during the regular run of the previous period is reduced. The remaining amount is recovered from the employee.

For example, employee A receives a gross taxable income of INR 12000 till April 2008. His payroll for April is executed and exited. His Annual Income Tax was calculated as INR 1,200 and monthly Income Tax was calculated as INR 100 which was deducted from his April salary. In April 2008, employee A gets a salary revision which is with effect from March 2008. His taxable income is raised to INR 24,000. Due to this, his annual IT increases to INR 2400 and monthly income tax raises to INR 200. In this case, if you execute a correction run for April on May 5, the system during the regular payroll run executed on May 5:

  • Reflects the difference amount, which is INR 1200 in the RT

  • Calculates the monthly IT for April, which is INR 200. Since INR 100 is already paid by the employee, the remaining INR 100 is recovered.

Posting

When the retroactive payroll run is triggered because of correction off cycle payroll run, complete gross to net computation is performed just like a normal offcycle processing. This is to ensure that the recomputed values of all statutory contributions are updated during this retroactive payroll run, considering the modified master data. However for the regular payroll run performed on the date of correction run, system considers only the difference amount, depending on the functionality behavior.

Reporting

Tax reporting

  • Challan mapping – You must select the current period while mapping during correction run. For example if you are running correction payroll for January in February, you must choose February while performing challan mapping.

  • Form 24Q – An additional line item in the Form 24 Q with the correction run details, if any is included in the e-filing.

  • Form 16 - In case a correction run is executed and happens to be the last payroll run in the financial year, the payroll data from this correction run is reported in Form 16.

    Caution Caution

    (relevant for Form 24Q and Form 16)

    If a correction run is executed for March in April, a corresponding entry is reported in the e-file generated for last quarter of previous financial year.

    End of the caution.

Other statutory reports

All reporting for Provident Fund annual reports, Employee State Insurance, Professional tax, Labour Welfare is based on Correction Run data. Provident Fund annual contribution difference will it be consolidated to the previous entry.

Configuration

  • Activate Business Function

  • Activate Correction Run. You can do so through Customizing for Payroll India under Offcycle Activities -> Correction Run.

Prerequisites

  • You must have maintained the Master Data change for period(s) to be corrected.

  • The date of Correction has to be prior to the next regular payroll run.

Constraints

  • Type A Off-cycles can be followed by regular run only and not by correction payroll run. Type B Off-cycles can be followed by another Type B (correction run followed by correction payroll run)

  • Corrections run across Financial Year is not supported. For last FY correction made in next FY will be handled as follows

    • Accounted to the previous FY

    • Form 16 and Form 24Q pick the corrected data as well

  • More than one correction on the same day is not supported.