Arrears
Arrears is the term used when deductions cannot be taken during a payroll cycle because an employee's pay is insufficient to support all scheduled deductions. The next time the employee receives pay, the deductions are applied to the pay.
Payroll creates arrears in three situations:
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A deduction is defined to create arrears and an employee assigned that deduction does not have enough pay to cover the deduction when Payroll creates deductions.
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An employee is assigned deductions that must be taken every pay period, but the employee does not have any time records in current, processed, or error status for a pay period. You must run an arrears automation program for Payroll to create these arrears deductions.
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An employee is assigned deductions that must be taken every pay period and does have current time records, but does not receive any net pay (receives only non-cash pay) for a pay period. You must run an arrears automation program for Payroll to create these arrears deductions.
How does Payroll put deductions into arrears?
You define how a deduction goes into arrears when you define the deduction code. Below are the selections you can make to define how a deduction goes into arrears:
| All or None - Yes | If the net pay is insufficient to support the deduction in full, the application does not take the deduction and the entire amount is put into arrears. |
| All or None - No | If the net pay is insufficient to support the deduction in full, the application does not take the deduction and no arrears are created. |
| Net to Zero - Yes | The application will take as much of the deduction as possible until net pay is zero and places the remaining amount in arrears. |
| Net to Zero - No | The application will take as much of the deduction as possible until net pay is zero and does not place the remaining amount in arrears. |
Example
Two Rivers Company has defined all the Tax deductions with arrears set to Net to Zero - Yes. Therefore, if there is not enough pay to cover the necessary tax deductions, the application will take as much as it can and put the remaining tax deductions into arrears to be taken the next time the employee is paid.