--- title: Creating a Back Pay Custom Pay Type description: This example shows how to set up a custom pay type for a taxable pack pay. --- [Skip to content](https://help.thankyoupayroll.co.nz/en/custom-pay-type-t-back-pay-allowance#main-content) English Show submenu for translations [More support](https://help.thankyoupayroll.co.nz/en/kb-tickets/new?hsLang=en) ![TYP\_Logo-09-1.png\]](https://help.thankyoupayroll.co.nz/hs-fs/hubfs/TYP_Logo-09-1.png?height=40&name=TYP_Logo-09-1.png) Open main navigation Close main navigation - English Show submenu for translations - [More support](https://help.thankyoupayroll.co.nz/en/kb-tickets/new) - [Visit our website www.thankyoupayroll.co.nz](https://www.thankyoupayroll.co.nz/) [Visit our website www.thankyoupayroll.co.nz](https://www.thankyoupayroll.co.nz/) Kia ora! How can we help you? - There are no suggestions because the search field is empty. 1. [Help Centre](https://help.thankyoupayroll.co.nz/en?hsLang=en) 2. [Employee Settings](https://help.thankyoupayroll.co.nz/en/employee-settings?hsLang=en) 3. [Examples of Custom Pay Types](https://help.thankyoupayroll.co.nz/en/employee-settings?hsLang=en#examples-of-custom-pay-types) # Creating a Back Pay Custom Pay Type ## This example shows how to set up a custom pay type for a taxable pack pay. *Updated: May 2025* You gave your employee a pay raise that requires a back pay for the period that was underpaid. Let's break down this example. | ![Info - Blue Block (1)](https://help.thankyoupayroll.co.nz/hs-fs/hubfs/KnowledgeBase/CalloutIcons/Info%20-%20Blue%20Block%20(1).png?width=52&height=52&name=Info%20-%20Blue%20Block%20(1).png) | Back pays are quite common in payroll. You need to calculate the amount your employee is due - the difference between what they should have received, and what they were paid.  \*[We have a handy tip to help you find the employee's pay information needed](https://help.thankyoupayroll.co.nz/en/custom-pay-type-t-back-pay-allowance#BackPayInfoFinding). | | --- | --- | Let's break down this example. **This allowance is**: | ❕ | I can use the Lump Sum [system pre-loaded pay type](https://help.thankyoupayroll.co.nz/en/discovering-pre-loaded-pay-types?hsLang=en) for this, but I want to create my own pay type for clarity. | | --- | --- | | ✅ | I prefer using a custom pay type for clarity on the payslip or/and tracking purposes. | | ✅ | This is a before-tax allowance, meaning taxed as part of the employee's gross wages. | **The custom pay type & timesheet should have the following**: | ✅ | Custom pay type created in the **taxable** section | | --- | --- | | ✅ | **Rate**: **1**  \| **Per**: unit | | ✅ | Back pay amount entered on timesheet for transparency | | ✅ | This is income and taxed as part of gross wages. | **Here is an example setup:** > ![CPT\_BackPay](https://help.thankyoupayroll.co.nz/hs-fs/hubfs/KnowledgeBase/screensteps/Employee%20Settings/ExampleScenarios/CPT_BackPay.png?width=608&height=559&name=CPT_BackPay.png) > > - Create this custom pay type with a recognisable name in the Employee Profile - Pay Types tab and **SAVE**. > - Select your recognisable pay type from the dropdown timesheet list. > - Enter the back pay amount owed in the timesheet. > - This should **not be excluded** from annual leave calculations (blank tick box). > - The timesheet summary displays all taxable allowances together with the standard pay as one combined Gross figure. > - In this example, the $500 back pay amount is added to the income gross before the tax is calculated. | ![Info - Blue Block (1)](https://help.thankyoupayroll.co.nz/hs-fs/hubfs/KnowledgeBase/CalloutIcons/Info%20-%20Blue%20Block%20(1).png?width=52&height=52&name=Info%20-%20Blue%20Block%20(1).png) | Adding the back pay to your regular pay run, as opposed to processing it separately, will ensure that required deductions (especially student loan and child support deductions) are calculated correctly. Remember: any required deductions (student loan, KiwiSaver, child support, IRD debt, MOJ fines) must be made from any taxable payments and thus also apply to back pay. | | --- | --- |   | **Our Tip To Finding The Information Quickly:** - Use [Quick Reports](https://help.thankyoupayroll.co.nz/en/quick-reports?hsLang=en): - choose the relevant pay numbers for the employees - use either the pay summary, or pay type summary report - this will show you how much they were paid per pay type. Now simply calculate the difference for the back pay. | | --- | --- ### Further Resources - [Information on lump sum payments - IRD's website](https://www.ird.govt.nz/employing-staff/payday-filing/non-standard-filing-of-employment-information/lump-sum-payments). - Need more information on [creating custom allowance pay types? 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