Setup Considerations: Retroactive Pay Processing

What It Is

The retro pay functionality enables you to react to past payroll activity in workers' current payroll by:

Recalculating pay results for impacted prior periods, back to a specific date.

Reporting differences between the original and the recalculated pay results.

Paying the differences in the current period.

Business Benefits

The retro pay functionality gives you the flexibility to adjust your current payroll to reflect updates to past payroll runs. Workday also enables you to:

Pay those differences as part of the workers' regular pay or through on-demand payments.

Keep track and audit those updates using reports.

Use Cases

You can use the retro pay functionality to process past events, such as when you retroactively:

Change a health care plan election for a worker.

Enter a bonus for a worker.

Hire or terminate a worker.

You can also process events workers enter, such as when they retroactively:

Submit a leave of absence.

Enter time off or time worked.

Questions to Consider

Questions	Considerations
What time frame do you want to consider for retro events?	The No Retro Processing Prior To (NRPPT) date sets the earliest date for processing retro events for each worker. You can control this date at the level of the: Tenant by setting the maximum number of months before the current pay period to enable retro processing. The preset value is 24 and the maximum you can enter is 72. Example: You can exclude any events that occurred during previous tax years. Worker by setting the earliest date for retro processing. Example: You can exclude events for a worker before their rehire date. The tenant-level setting takes precedence over the worker-level NRPPT date. When you run the retro pay calculation, Workday changes that date based on the type of workers and events you're processing. You can move the NRPPT date forward or backward, but not before an unsupported retro event.
When and how do you want to process retro differences?	You can schedule: Retro pay calculations to start automatically, either once in the future or on a recurring basis. Pay calculations to run after each retro pay calculation to pay the workers' retro differences as soon as Workday generates them. You can pay the retro differences as part of the workers' regular pay or using on-demand payments such as for a bonus. When you need to review the retro results, you can temporarily suspend them and: Exclude them from further processing. Bring them back later by canceling the retro results and rerunning retro. Example: You terminated a worker's employment and entered a retroactive bonus. You want to confirm this bonus with another department before paying it, so you suspend the retro result. You can later process payment manually.
How do you want to process retro differences for workers in multiple pay groups?	You can configure a tenant-level setting to either: Forward retro differences to the workers' primary pay group. Treat the events as unsupported, so that you can process retro differences manually in the prior pay group. After you run retro, you can update the target pay group to another based on worker eligibility.
Which workers do you want to process with the retro pay calculation?	When workers have existing pay results in completed pay periods, you can enter supported events to process them in retro. When workers have no pay results in completed pay periods, create off-cycle payments for prior periods instead of running retro. Example: You retroactively enter time worked for hourly workers who haven't logged any hours yet.
How do you want to display retro results on payslips?	You can use Report Designer to create specific payslip layouts. Example: You can display consolidated retro results instead of 1 line per retro result.

Recommendations

Before Running the Retro Pay Calculation: Before running the retro pay calculation for the first time, avoid unexpected results by defining the
Maximum Months Allowed For Retro Processing
for your tenant. Workday determines the earliest period for which to recalculate earnings and deductions by:
Finding the current start date of a worker's primary pay group.
Setting the NRPPT date to the date that precedes the current period start date by the number of months you define.
You can then adjust that period for individual workers. For best performance, set the number of months to 24 or less.

Review which events that you can and can't process with the retro pay calculation in these reports:
All Supported Payroll Retro Transaction Types
All Unsupported Payroll Retro Transaction Types

To avoid workers' NRPPT dates set in the future after you run retro, which results in unprocessed retro for current and future-dated events:
Create run categories with period schedules that don't go beyond the schedules of the regular run category. Example: You configure a nonregular category such as bonus or commission with an annual period schedule with periods from January 1 to December 31. After this period is complete, when workers have unsupported events, Workday considers December 31 as the last day of the completed pay period, even if the current month is June. Therefore, when you run retro, Workday moves the NRPPT date to the future, to the last completed pay period plus 1 day (1 January 2021).
Complete pay periods after the last completed period of the regular run category.

Workday recommends that when you configure pay components to recalculate in retro, you only reference other pay components that also recalculate in retro. This configuration ensures that retro uses correct amounts when calculating prior periods. Example: You leave the
Do Not Recalculate During Retro
check box clear on an earning. To reference another earning, select 1 with the check box clear. To reference a deduction, select 1 with the
Recalculate During Retro
selected.; You can use the
Retro Calculation Processing Configuration
task to not process retro before an effective date for supported retro events for:
Completed periods without on-cycle or on-demand replacement results (except for retro leave of absence, retro hire, and retro termination).
A worker’s additional job for a completed period without on-cycle or on-demand replacement results.
A worker's non-regular run category for a completed period without on-cycle or on-demand replacement results.
Once you select an effective date, Workday won't calculate retro differences for these scenarios for pay periods before that date. This avoids double payments if workers receive supported retro entries back to periods with unprocessed retro.

Before removing or modifying the effective date you initially set, ensure there’s no retro processing in progress.

For Payroll for the U.S., Workday recommends enabling these tenant settings from the
Pay/Retro Calculations
Retro Calculations - USA
section of the
Edit Tenant Setup - Payroll
task:
Enable Retro Processing from Different Tax Authorities to On-Cycle Payroll
Enable Taxes on Retro Amounts from Prior Tax Authorities
With these tenant settings enabled, when you process retro pay for a worker with a tax authority in the retro period that's different from their tax authority in the current period, Workday pulls the retro pay into the current period and taxes it based on the tax authority in effect during the retro period.

For Payroll for Ireland and the UK, if you currently support future dated retro hires, we recommend you edit any relevant run categories to use this setup:
Create a tenanted calculation that determines if the worker hire date is less than or equal to a certain date of the month, based on your business needs. Example: Worker: Hire Date <= 19th of the Month.
Access the
Create Run Category
or
Edit Run Category
task.
On the
Workers To Process grid
, configure the Active Status row as follows:
Add the new hire date condition.
Add the Workday delivered calculation Retro Pay Calculation
as an OR statement. This is a Workday delivered value comparison calculation that specifies that the worker should be picked up by retro pay calculation
Running the Retro Pay Calculation: Run the retro pay calculation at least once before running each on-cycle pay, including the initial payroll run (manual or scheduled). This practice maximizes the number of supported retro events that Workday can process and forward to workers' regular pay results.
Consider the frequency for running retro when you enable continuous calculations, depending on how many retro events you process.

When updating configurations, use effective dating whenever possible to ensure that retro processing considers the new configuration.

Because retirement savings are a percentage of, or based on other pay components, don't recalculate them during retro to prevent:
Double-counting those earnings.
Potential regulatory limit issues.

After running retro, access the

Retro Calculation Processing Report

and resolve any negative retro differences to avoid errors in payroll.

Off-Cycle Payments for Pennsylvania Workers (USA): When you create off-cycle payments for Pennsylvania workers using the
Run Retro Pay Complete for Subset of Workers
task from the
Retro Calculation Processing Report
with:
The Complete
option selected.
The
Primary EIT
check box selected on the
Add Worker US Tax Elections
task.

The tax election configured takes precedence over the
City Withholding (work)
worktag override.

However, Workday recommends you to verify the Pennsylvania city withholding when processing retro payroll.

Requirements

For All Workers: Before running retro, make sure that the workers to process have:
Existing completed pay results, except for leave of absence, hire, and termination. For those events, the retro pay calculation creates zero payroll results for the prior periods.
Only supported retro events occurring after their NRPPT date. When they also have unsupported events, Workday moves their NRPPT date forward to exclude those events. However, Workday then ignores any supported events before the new NRPPT date.
A target period that matches the current pay period. Example: An hourly worker hasn't entered time worked for the current pay period, so this period has no existing results. When you run retro for that worker, you can't forward retro differences to the current pay period.
Only 1 company assigned (FRA, IRL, UK).
Only 1 tax authority assigned (CAN, USA).
For Specific Events: Configure run categories that you use in retro pay calculations to include specific statuses:
Retro leaves of absence with
Payroll Effect
enabled: Select On Leave
on the
General
and
Nonactive (On Cycle, On Demand Replacement)
tabs.
Retro terminations, and supported events for terminated workers: Select Terminated with Retro Differences
and Terminated with Retroactive Events (for Retro Pay Calc only)
on the
General
tab.

Workday supports processing retro events from other pay groups when you enable it for your tenant. When the workers' primary pay group is a newly created pay group with no existing pay results, before running retro:
Run and complete payroll for the first period of the period schedule assigned to the new pay group. Make sure that the pay group doesn't have an
Override First Processing Period
selected.
Transfer the workers to the new pay group starting on the second period.

Limitations

Limitation	Details
Unsupported retro events.	The All Unsupported Payroll Retro Transaction Types report lists unsupported retro events by country. Process these events manually through payroll input or off-cycle payments.
Updates that don't trigger the retro pay calculation.	Workday doesn't handle changes to these settings as retro events: Definition of effective-dated pay components. Example: Changing the pay group detail eligibility. Effective date of compensation changes. Example: Backdating a change to a compensation plan. To process these changes, enter a supported retro event for the worker such as payroll input with a zero amount.
Corrective retro for taxes.	For Payroll for the UK, the retro pay calculation recalculates: National Insurance amounts for completed periods for a retro hire event. National Insurance, tax, student loan, and postgraduate loan amounts, and any pay components for apprenticeship levy, for a retro termination event. Workday doesn't recalculate for completed periods for any other taxes for Payroll for the UK. For Payroll for Ireland, for retro termination, the retro pay calculation: Recalculates tax, Pay Related Social Insurance (PRSI), and Universal Social Charge. Doesn't recalculate PRSI insurable weeks. For Payroll for Canada, France, Ireland, applicable taxes in the UK, and the U.S., Workday: Forwards retro differences between a worker's original and recalculated results to their current pay results. Applies the tax rates in effect for the regular run category in the current pay period.
No supported events selection.	When workers have supported events and no unsupported events, you can't select which events to process. Workday includes all supported events.
Arrears.	The retro pay calculation doesn't put deductions into arrears or recoup arrears generated in completed pay periods. When you run retro for a deduction that went into arrears, Workday considers the arrears balance when calculating the retro differences. Example: A deduction of 100 went into arrears. When you retroactively change the deduction to 120, Workday calculates the retro difference as 20.
International assignments.	Workday doesn't process retro differences for workers on international assignments because of limitations related to currency conversion and tax implications.
Payment reversals (CAN, UK, USA)	When you forward retro differences to the current period from a period that you reversed, manually remove the differences in the current period. Example: You can offset retro differences using payroll input. When you forward retro differences to a period and later reverse that period, Workday: Recovers the retro differences. Adds them to the worker's current pay results.
Gross ups.	The retro pay calculation doesn't recalculate gross-up earnings.
Effective date of your first Workday Payroll transactions.	The retro pay calculation doesn't process any events before the effective date of your first Workday Payroll transactions.
Change to payroll processing position (USA)	Workday doesn't support retroactive changes to processing position that result in a tax authority change. Example: Retroactively changing a position attribute that's used to determine the processing position when the positions are in different work states.

Tenant Setup

You can use the

Edit Tenant Setup - Payroll

task to:

Exclude completed on-demand additional results in the current period when determining which periods to process in the retro pay calculation.

Disable processing pay components with retro differences for non-active workers (terminated or on leave).

Set the maximum number of months before the current period for considering retro events.

Enable processing retro differences from another pay group in the workers' primary pay group.

Enable processing retro differences from different tax authorities to on-cycle payroll for USA only.

Enable tax calculation under the correct tax authority for retro pay for USA only.

Set the retro target period when a worker has a completed replacement payment in the current period.

Security

Configure the Change No Retro Processing Prior To
business process and security policy, and these domains in the Core Payroll functional area:

Domains	Considerations
Process: Off Cycle (On Demand)	Enables users to include retro results in on-demand payments.
Process: Run Batch Calculations (Retro Calculation)	Enables users to: Change the NRPPT date for multiple workers. Change the retro setting on a pay component. Run or schedule retro pay calculations.
Process: Run Batch Cancel (Retro Cancel)	Enables users to cancel completed or in-progress retro results.
Process: Run Batch Complete (Retro Complete)	Enables users to complete retro results.
Reports: Pay Calculation Results for Pay Group (Results)	Enables users to review retro results on reports such as the Retro Calculation Processing Report . Managing retro results on this report requires security that's specific to each action. Example: Canceling retro results through the report requires access to the Process: Run Batch Cancel (Retro Cancel) domain in the Core Payroll functional area.

Business Processes

Business Processes	Considerations
Change No Retro Prior To Date	Use this business process to change a worker's NRPPT date.
Hire	Use this business process to correct a worker's location retroactively, then run the retro pay calculation to calculate differences due to that change.
Termination	To exclude any pay period before a rehire date, add a To Do step to this business process to advance a worker's NRPPT date. When you rehire the worker, Workday doesn't process any retro events between the termination and the rehire date.

Reporting

You can use the

Pay Calculation Retro Result Lines for Pay Group

report data source when creating custom reports on retro payments.

The date you enter as the Retro Processing Date on retro reports such as the

Retro Calculation Processing Report

or the

Retro Pay Calculation Result Audit Detail Report

reflects the date of the first retro pay calculation after your last complete. Example: When you

Run Retro Pay Complete

task for a full pay group on 03/06/2022 and then initiate the

Run Retro Pay Calculation

task on 03/08/2022, Workday uses 03/08/2022 as the Retro Processing Date.

Reports	Considerations
Payroll Changes Unprocessed for a Retro Run	Enables you to identify unprocessed and unsupported retro events that need a manual adjustment.
Retro Calculation Processing Report	Enables you to review and troubleshoot retro results by filtering results using facets. Example: You can display workers with: Unprocessed events. Unsupported events. Negative retro differences. Nonactive statuses. You can also: Review the retro difference source on the subreports. Examples: Compensation change or bonus payment through payroll input. Suspend, cancel, or complete retro results for a subset of workers. When you run the retro pay calculation, Workday assigns statuses such as Unprocessed that you can use to filter results.
Reversal Results with Retro (CAN, UK, USA)	Enables you to identify workers with retro differences when you later reversed the source or target period.

Integrations

You can use these web services:

Change No Retro Processing Prior To
: To change the NRPPT date by worker for multiple workers at a time.

Import Payroll Off-Cycle Payment
: To pay retro differences through an off-cycle payment instead of the regular on-cycle payroll.

Connections and Touchpoints

The retro pay calculation has touchpoints with all the supported events that you can process such as compensation changes or time tracking. You can view the full list by country using the

All Supported Payroll Retro Transaction Types

report.

Features	Considerations
Benefits.	When workers have a supported retro event and you run retro, Workday processes all: Other supported events within the retro period. Benefits changes, even when they don't trigger retro.
Earning or deduction limits.	You can limit retro payments based on pay components and related calculations. When you calculate the workers' current payroll, Workday includes retro differences in the current pay component value. When the total retro differences for the recalculated periods exceed an earning or deduction limit, Workday reduces those differences to the limit.
Multiple subperiods.	When forwarding retro results in payroll results with gross-to-net proration, Workday includes the differences to the first subperiod.
Payroll run categories.	Payroll run categories determine which pay components to process based on worker eligibility. The retro pay calculation forwards retro differences from all run categories to the regular run category. Workday provides several processing statuses referring to retro that you can use to identify workers to process. Example: Terminated with Retro Differences .
Pay balances.	You can calculate and forward retro differences to the current pay period from earnings that are either from: Any completed periods. A period that falls within the current pay balance period. You can also exclude all retro differences from pay balances.
Pay components.	You can configure which pay components to recalculate in a retro pay calculation. Retro uses the pay component definition on its effective date when it falls within the processed period. Even when you don't configure pay components to recalculate, Workday always evaluates these pay component settings for workers who have a supported event: Worker eligibility criteria. Active or inactive status. Example: You leave Recalculate During Retro clear for a deduction and either: You inactivate the deduction for a completed period. The worker no longer meets the eligibility criteria. When you run retro for that period, Workday still refunds the deduction in the current period.

Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.