Prior Period Adjustment

What Is Prior Period Adjustment (PPA)?

A prior period adjustment (PPA) is a correction to a reported time, pay, or classification on an employee’s previous payroll.

Though employees and employers should make an effort to accurately report and calculate payroll, sometimes things get overlooked. And these errors are often not caught until after timesheets have been submitted.

To amend information in their previous payroll, you and your employee need to carry out a PPA.

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When Would You Need to Make Prior Period Adjustments?

PPAs are required when there is a timesheet error that impacts an employee’s pay and/or benefits.

The Fair Labor Standards Act (FLSA) provides benefits and protections that pertain to specific employees and affects the way they are paid. Therefore, the right information needs to be recorded to ensure each worker has access to the wages and benefits they are entitled to.

Here are a couple of situations that would necessitate a prior period adjustment:

How Do You Fix Prior Period Errors?

Payroll adjustments should be made as soon as possible to avoid state/federal penalties and fees. Though timesheet software and processes differ across organizations, PPAs are generally carried out as such:

How Can You Prevent the Need for Prior Period Adjustments?

You can prevent or minimize the number of PPAs by doing the following:

Keep in mind, mistakes do happen. So be sure your payroll administration team has a PPA checklist ready to go in the event adjustments need to be made.