Prior Period Adjustment
Mastering Payroll Accuracy: The Prior Period Adjustment (PPA) Guide
Unveiling Prior Period Adjustment (PPA):
A Prior Period Adjustment (PPA) is a rectification to reported time, pay, or employee classification in a previous payroll cycle. Unforeseen errors, often discovered post-timesheet submissions, necessitate the execution of a PPA by both employers and employees.
The Why Behind Prior Period Adjustments:
PPAs become imperative when timesheet errors impact an employee’s pay and benefits, aligning with Fair Labor Standards Act (FLSA) provisions. To ensure entitled wages and benefits, accurate information must be recorded. Instances requiring PPAs include misclassifications affecting overtime pay and incorrect timesheet entries resulting in reduced pay.
Remedying Prior Period Errors:
Swift payroll adjustments are crucial to circumvent potential state/federal penalties. While specific processes may vary, the general steps for PPAs involve canceling the previous payroll, adjusting the erroneous timesheet, and aligning the subsequent payroll cycle to restore balance.
Proactive Measures to Avoid PPAs:
Minimize or prevent the need for PPAs with proactive measures:
- Weekly Reminders: Promptly remind employees to fill in and review timesheets before deadlines.
- Legal Knowledge: Stay informed about payroll laws and policies, ensuring your payroll admin team is equipped to avoid errors.
- Effective Payroll Software: Invest in reliable payroll software and HRIS to streamline processes and mitigate human error.
- Pre-Payroll Reports: Utilize payroll software for essential pre-payroll reports, such as deductions summaries and payroll registers, to catch mistakes before deadlines.
PPA Checklist Preparedness:
Acknowledge that mistakes can occur. Ensure your payroll administration team is ready with a comprehensive Prior Period Adjustment (PPA) checklist for swift and effective adjustments when needed.