Understanding Arrearages

An arrearage occurs when an employee's scheduled deduction is not taken because they did not have enough earnings to cover the deduction or because a paycheck was not issued to the employee in the scheduled payroll. This often affects on-leave employees or those who do not regularly receive a paycheck, such as commission-only employees. You could also have an earnings code that results in a payment, such as a taxable fringe benefit that affects an employee's taxable earnings and thereby deducts more taxes.

ExponentHR automatically processes deductions that have gone into arrears by setting up a repayment schedule and will continue to withdraw the same payment in each paycheck until the arrearage balance is zero. The very first arrearage amount incurred becomes the default ”per-check” arrearage repayment amount for that deduction type, regardless of the total arrearage balance or any future changes in the scheduled deduction amount. This means the first-time arrearage amount will always be the arrearage payment amount per check, even if a life event or some other activity causes the scheduled deduction to change.

The Arrearage Management tool allows you to override the per-check arrearage payment amount and adjust balances, as well as create new earnings or deduction arrearage payments. See the Related Help Topics.

Note: If the employee's earnings are less than the total payment (the scheduled deduction plus the arrearage payment), no deduction is taken for the specific deduction type. However, deductions may still be taken for the other types where the employee has enough earnings to cover those payments.