Summary
Resolution
Example 1: PRSI correction only
Unlike PAYE, PRSI calculates on a non-cumulative basis. The change does not affect any future pay run. Make any change in the employee’s pay through a separate payment or deduction in the current pay run.
In January (pay run 1), the payroll used PRSI code A1 instead of Code A5.
As a result, a payment for Employer PRSI is made in January when it is not due. This error has no impact on any subsequent pay run.
Example 2: PAYE, PRSI and USC correction in the next pay run
In this example, we correct a completed pay run during the next pay run.
You have a monthly payroll. You missed an employee overtime payment of €100 in the January pay run. The current month is February (pay run 2). Processing is still in progress.
Open the completed January pay run in correction mode to add the missing €100 payment to the employee’s pay. You see the effects of this in the February pay run.
The recalculation reveals the employee should get a further €48 on top of their January net pay.
The system pays this in the current pay run (February) as a separate payment in the employee’s payslip.
Example 3: PAYE, PRSI and USC correction several pay runs later
In this example, we correct the January pay run (pay run 1) during the April pay run (pay run 4).
You have a monthly payroll. You missed an overtime payment of €100 from an employee’s pay in the January pay run. The current month is April (pay run 4). Processing is still in progress.
Open the completed January pay run in correction mode to add the missing €100 payment to the employee’s pay. You see the effects of this in the February, March and April pay runs. The system adds the extra payment or deduction to the employee’s April payslip.
PAYE calculates cumulatively using the relevant period’s Taxable Pay (Year to Date) value. This is €100 higher in both February and March as a result of the correction in January. The calculation is cumulative and does not involve a band change. The tax due in February and March does not change as a result of the correction.
The recalculation reveals you owe the employee to an extra €48 on top of their January net pay.
The system pays this in the current pay run (April) as a separate payment in the employee’s payslip.
Example 4: PAYE, PRSI and USC correction several pay runs later, involving a move to a higher tax bracket
In this example, we correct the Week 1 pay run during the Week 4 pay run.
You have a weekly payroll. An employee has a missed overtime payment of €400 in the Week 1 pay run. You are currently in Week 4. Processing is still in progress.
You need to open the completed Week 1 pay run in correction mode to add the missing €400 payment to the employee’s pay. You see the effects of this in Week 2, Week 3 and Week 4 pay runs. The system adds an extra payment or deduction to the employee’s Week 4 payslip.
PAYE calculates cumulatively. The correction to taxable pay in Week 1 causes increases in the values for Taxable Pay (Year to Date) in Week 2 and Week 3.
The overtime amount in Week 1 pushes the employee into the higher PAYE rate band.
In the original calculations in Weeks 2 and 3, the employees’ Standard Rate Cut-Off Amounts exceeded their pay. In the recalculations, it will use this “unused” part of the cut-off amount. The employee is actually liable for less tax in Week 2 and Week 3 figures than was first calculated.
So the correction has had various effects in Weeks 1, 2 and 3.
In Week 4, the employee will receive a corrective payment for €181.50.
Related Solutions
- Read our article Everything you need to know about correcting errors
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