Paycheck Reversals and Adjustments:

What is a Paycheck Reversal?

A reversal is appropriate when youve produced a check that you subsequently realize
should not have been produced at all, or should not have been produced how it was,
and the check has not been cashed or deposited.
What is an Adjustment?
An adjustment is appropriate when employee is NOT paid correctly. Either employee is
paid extra (by giving him higher rate ) or employee is paid less than what he should been
paid (by giving him lower rate).
Rules for Reversal and Adjustment:

If the check has not been cashed or deposited, run a reversal.

If the check has been cashed or deposited, run an adjustment.

Examples of Paycheck reversals/adjustments:

1) Salaried Employee was paid where he shouldnt have been paid. This happens
when an employee is terminated, but the termination transaction is NOT entered
in the system. By default, PeopleSoft would generate a paycheck. The
PeopleSoft user would have to reverse this paycheck using Off-Cycle Process.
2) Employee Paycheck was lost or stolen
3) Employee got incorrect rates, or paid him extra overtime, or did not include
overtime.
4) An employee should have been paid for 20 hours of overtime, but deposited his
check before realizing the overtime was not on it. He requests his overtime pay.
The adjustment process calculates the check as it should have been calculated in the
first place and compares the new calculation to the calculation for the original check. In
the example of unpaid overtime, you issue a single check for the difference. In some
cases the employee might owe the company money, in which case you process a
negative adjustment.

Navigation to Reversals and Adjustments:

Comparison of Reversal and Adjustment

The Paycheck Reversal/Adjustment process produces different results, depending on whether
you select Reversal or Reversal/Adjustment for your run control:
Reversal

Produces a negative image of the original pay record, with all the amounts changed
from positive to negative. This effectively backs the check out of the system.

Adjustment Produces an off-cycle paysheet page with two pay lines: a Reversing Adjustment
with a net pay of zero and an Adjustment record where you enter the information for
the check as it should have been originally.
When you reverse a check, you generally either cut a new on-demand check for the correct
amount or do nothing after having reversed it (if that check shouldnt have been issued at all).

When you adjust a check, three situations are possible:

No change in net pay.

For example, an employees pay is incorrectly charged to Department 10100 instead of
Department 10010.

The company owes the employee money.

The original check is for too small an amount. For example, you pay an employee for 2
hours of overtime instead of 20 hours.

The employee owes the company money.

The original check was for too large an amount. For example, you pay an employee for
20 hours of overtime instead of 2 hours.

Paycheck Reversal
Run paycheck reversal when a system-generated check is incorrect and has not been
cashed or deposited. This program locates the checks youve specified on a special run
control and creates an off-cycle paysheet page for each reversal. The resulting paylines
reflect the original paysheet entries, with negatives in the hours and amount fields.
These pages are display-only.
During the Paycheck Reversal/Adjustment process, the system makes a copy of the
paycheck record and reverses the signs (plus/minus) on the amount fields. The original
paycheck record is retained, not deleted.

Example of a Paycheck Reversal:

Paychecks for KU0007

Lets look at 04/01/2005 , check number 2968

Lets try to reverse this paycheck.

Steps:
1)
2)
3)

Run a Reversal
Verify the Reversal
Confirm the Reversal

Before going to step 1, lets check the May 2005 CHECK YTD balances for KU0007

Now, lets go to step 1.

Run a Reversal

Click on the link Reverse / Adjust Paycheck

You need to pick the Pay End Date that is currently open.
Enter all other relevant info of the check that you want to revere (i.e. check numer 3868)

Reversal

Select for a check reversal.

Reversal/Adjustment

Select for a check reversal and an adjustment check.

Delete Current
Reversal/Adjustment

To delete an unwanted reversal or reversal/adjustment, set up a run

control with this option selected and run the Paycheck
Reversal/Adjustment process

Pick Reversal and click run and process it.

Now if you go and check the Paychecks, there will be another paycheck entry with same
paycheck number:

Lets see , the details of this reversed Pay Check (step 2)

IT is the same original check, but all have negative entries to void the numbers.
The current check status is Reversing.

IN order to confirm this reversal, we need to run the Pay Confirm Process:

Click Run and Process it.

The Paycheck status is confirmed and Option is Reversed.

Check YTD Balance:

The above entries are been updated after the reversal confirmation

Paycheck Adjustment
There are 2 possible situations for this.

The company owes the employee money.

In this situation, the system produces a check for the amount owed.

The employee owes the company money.

In this case, you can put the amount into an arrears balance to be taken out of
subsequent paychecks. Or you can attempt to get the money back from the employee by
other means.

Use the Paycheck Reversal/Adjustment page to both adjust and reverse paychecks

IN Order to use Paycheck Adjustment, you need to have:

Set up the NETPAY deduction code.

Set up to collect negative adjustments.

Setting Up the NETPAY Deduction Code

To process adjustments, the system uses a special deduction called Net Pay Adjustment with a
deduction code of NETPAY. Before processing adjustments, you must set up this deduction code
on the Deduction and the General Deduction tables and add it to the Company General
Deductions table. You can use the NETPAY deduction that is supplied with the demonstration
database as an example.
During the reversal step of the adjustment process, the system reverses the original check,
producing a calculated check reversal. It does this by subtracting a NETPAY deduction equal to
the employees net pay on the original check.

Delivered NETPAY Deduction Code:

Setting Up to Collect Negative Adjustments

If the adjustment results in the employee owing the organization, you must have set up an
adjustment deduction code and a corresponding adjustment earnings code that the system uses
to process adjustments of this type.
When you set up the adjustment earnings code, you link it to the corresponding adjustment
deduction code through the Payback Deduction Code field on the Earnings Table - Taxes page.
Setting Up an Adjustment Deduction Code
An adjustment deduction code is necessary to process check adjustments for which the
employee owes the company money. If you have not already done so, you can set up a generic
adjustment deduction code, such as PAYADJ. Alternatively, you can establish several such
deduction codes, one for each negative adjustment payback situation youre likely to encounter,
but each would require a corresponding adjustment earnings code. For example, if youre
adjusting checks that were calculated using the wrong taxing jurisdiction, you could set up a tax
adjustment deduction code: TAXADJ.
To set up the adjustment deduction code:
1. Set up the Deduction table.
On the Deduction Table - Process page, select the Deduction Arrears Allowed check box
and enter the appropriate general ledger expense and or liability accounts.
2. Set up the General Deduction table.
If you use the generic PAYADJ code, the General Deduction table is set by default with
the information needed to calculate the payback adjustment deduction.
If you choose to specify your own deduction for this purpose, you must define the code
on the General Deduction table with your own calculation routine and specifications.
3. Set up the Company General Deductions table.
For each company, add each adjustment deduction code in the Deduction Code column.
Setting Up an Adjustment Earnings Code
An adjustment earnings code is necessary to process check adjustments for which the employee
owes the company money. Use a suitable code to designate this earnings, such as ADJ.
To set up the adjustment earnings code, use the Earnings and the Earnings Program tables.
1. Define the earnings code on the Earnings Table - General page:
Payment Type

Select Either Hours or Amount OK.

Effect on FLSA (effect on Fair Labor Standards Act)

Select None.

Eligible for Retro Pay

Not used for adjustment earnings.

2. Set up the Earnings Table - Taxes Page:

Payback
Deduction
Code

Enter a deduction code here to link to the earnings code. During the pay calculation
process for the paycheck reversal/adjustment, the system creates an arrears
balance for this deduction that is equal to the amount of the adjustment. On
subsequent payrolls, where the employee is paid, the system attempts to deduct
the overpayment from the employees future check(s) until the entire amount has

been collected.
Tax Method

Select Specified on Paysheet. The system selects the default values from the
paysheet.

Earnings

Select Add to Gross Pay and Maintain Earnings Balances. Clear all other check
boxes.

(USA) U.S.
Only

Clear all fields. This is important, because the adjustment earnings code should not
add to any taxable gross fields.

PAYADJ Deduction:

ADJ Earning Code:

Now lets take an example:

Reverse and Adjust 4100 check number

Net Pay is 3659.07 USD

Pick Reversal and Adjustment

After the above process, there is a reversal entry in the pay check

Status : reversing and adjustment is checked

If you notice the net PAY is 0.00 USD. As all the net pay amount is added to the
deduction.

Entering Adjustment Information on the Paysheet

When you run the Paycheck Reversal/Adjustment process, the system produces an off-cycle
paysheet page. The first paysheet entry appears as a Reversing Adjustment, with all fields
unavailable and a net pay of zero (blank).
Use the top scroll area to move to the other system-generated paysheet entry, the Adjustment
paysheet. This is where you enter the necessary adjustment information for earnings, deductions,
and taxes.
For example, if you forgot to pay the employee for 10 hours of overtime, enter 10 in Overtime
Hours; if you taxed her in the wrong taxing jurisdiction, enter the correct state or locality.
Save the paysheet when you finish entering your adjustments.

Pick the first payline :

All Paylines are non-editable

Use the top scroll area to move to the other system-generated paysheet entry, the Adjustment
paysheet. This is where you enter the necessary adjustment information for earnings, deductions,
and taxes.
For example, if you forgot to pay the employee for 10 hours of overtime, enter 10 in Overtime
Hours

Lets enter 10 hrs of Overtime. Which means GBI Company owes the money to
employee:

And run a pay calc. what this process would do is, pay the extra amount

So there is a new paycheck created

Only the amount the company owes is paid to the employee.

IF Employee owes GBI company Lets say, instead of getting paid for C01 Earnings as
71.54 , he should have actually paid , 1.54 cents.

Adjust the C01 71.54 USD to 1.54 USD:

Since we overpaid the EE in his original Check, EE owes money to GBI Company. First
here, we need to run a pay calc.
If the employee owes you money, the following message appears in the Paysheet, Payroll
Messages page (assuming there are no other errors):
The net pay calculated for this check is a negative amount.
The Message Data field at the bottom of the page displays a negative amount, which is the
amount the system has calculated the employee owes you. The system treats this as an error
because it is designed to produce checks for positive or zero amounts. A negative paycheck
amount is not valid.
If the employee is still employed, you can get the money back by putting it in an arrears balance
and having the system attempt to take it out of the next paycheck. In effect, you give the
employee the amount she owes by using an adjustment earnings code on the adjustment
paysheet. When you run pay calculation, the system converts the earnings to the corresponding
payback deduction code.
Here's how you set up the arrears balance to collect the overpayment:
1. Make sure you have set up the necessary adjustment earnings and adjustment deduction
codes.
See Setting Up to Collect Negative Adjustments.
2. On the adjustment paysheet, enter the overpayment amount as Other Earnings, using
the earnings code you set up for negative adjustments.
Save the paysheet.
3. Set up off-cycle pay calculation parameters and run the Pay Calculation process.
The system converts the earnings to a deduction (assigning it to the corresponding
payback deduction code) and puts the amount the employee owes into an arrears
balance to be processed in the next payroll.
4. Set up off-cycle pay confirmation parameters and run the Pay Confirmation process.
5. View results on the Review Paycheck pages.
6. The overpayment is deducted in the next pay cycle.

Payroll Error Message:

Now you take this approximate overpayment amount and enter it in the payline.
Sometimes, the above amount must be adjusted based on next time payroll error that
you get:

I had to add ADJ as 43.41 as I got one more error and added that (.17 cents ) to the
43.14 which is 43.51, but resulted into 10 cents net payment. So I took out 10 cents from
43.51 to get 43.41.
Ran a pay calc:

If we confirm the above paycheck, the 43.41 will go to arrears:

Based on PAYADJ arrears settings , the deduction is appear in next paycheck

Online Checks:
Stored Statement Error: