The HR Dictionary

Prior Period Adjustment

A prior period adjustment refers to a change made to an employee's payroll or benefits data for a previous pay period. This could be due to errors or omissions made during the initial payroll processing, or changes in an employee's status that were not properly reflected in their previous paychecks.

The adjustment may result in a change in the employee's net pay, as well as adjustments to taxes, deductions, and other payroll-related items. It is important for HR departments to make these corrections as soon as possible to ensure that employees are properly compensated and to avoid potential legal or financial issues.

Prior period adjustments may also be made to correct errors or omissions in employee benefits data, such as changes in an employee's enrollment status in a health insurance plan or a retirement savings plan. These adjustments can have implications for the employee's eligibility for benefits and may impact their future contributions or benefits.

How is A Prior Period Adjustment Made?

Prior period adjustments are typically made by running a separate payroll batch that includes the corrections or adjustments to the affected employees' data. The payroll team will identify the errors or omissions and make the necessary corrections, including adjustments to taxes, deductions, and other payroll-related items. Once the adjustments are made, the HR team will communicate with affected employees to inform them of the correction and provide details on how it will impact their pay or benefits. This may include issuing a separate paycheck or adjusting the employee's next regular paycheck.

For benefits-related adjustments, the HR team may need to work with the benefits provider or administrator to ensure that the employee's records are updated and any necessary changes are made to their future contributions or benefits.