Prior Period Adjustment

What is Prior Period Adjustment?

A prior period adjustment is a correction made to an employee’s payroll records after the original pay period has already been processed. These adjustments address errors or omissions in reported hours, compensation rates, tax withholdings, or job classifications.

Why Prior Period Adjustment Matters

Common triggers for prior period adjustments include retroactive pay raises, missed overtime hours, incorrect benefit deductions, or reclassification of employment status. Payroll teams must carefully document each adjustment and ensure that tax calculations, benefit contributions, and reporting are updated accordingly.

Timely processing of prior period adjustments helps organisations maintain accurate financial records and ensures employees receive the correct compensation they are owed.