Cross-year retro payroll and tax for Canada Payroll

[miteshjain]

Hello,

This is a question for Canada payroll (SAP SuccessFactors Employee Central Payroll).

We have a group of salaried employees paid bi-weekly. These employees are in Ontario and Quebec province. Payroll is processed before the end of pay period and employees are paid in advance. Time related information from external system is on a two weeks lag. 

For example: When payroll is processed for first pay period (PP) of 2025, employees are paid the bi-weekly salary for PP01 and any paid/unpaid absence for PP26/2024 will be processed with PP01/2025. When payroll is processed for PP02/2025, employees are paid the bi-weekly salary for PP02 and any paid/unpaid absence for PP01 will be processed with PP02.

During the year, we do not have issues with this scenario because earnings and taxes are adjusted in the period the data is applicable. However, the issue is specific to the scenario when absences are entered in current year for prior year and the absence has reduced the regular earnings. 

By default, standard SAP system does not change/recalculate taxes during cross-year retro. This is configured per payroll function KACYT and parameter ADJU. This is working as expected and we do not want to change this process. We want to bring forward the difference in earnings from prior year into the current year and calculate tax accordingly on the reduced earning. To achieve this, we configured the outflow/inflow processing, but inflow of regular earnings into current year is creating /103 and /153 (for Quebec), and the system does not calculate any tax on the negative inflow. Therefore, the tax calculated and displayed on pay statement is high as compared to the total earnings on the pay statement because the tax is calculated on the earnings in current pay period and no tax is calculated on the negative non-periodic income. Employee is not refunded for the taxes on reduced earnings for prior year.

For example: 

Regular earnings for PP01/2025 = $4,000

Difference in earnings from PP26/2024 due to unpaid absence for PP26/2024 after original period was processed = -$2,400

Total earnings displayed on pay statement for PP01/2025 = $1,600

/102 in PP01/2025 = $4,000

/103 in PP01/2025 = -$2,400 (negative inflow from PP26/2024)

/152 in PP01/2025 = $4,000

/153 in PP01/2025 = -$2,400 (negative inflow from PP26/2024)

Tax is calculated only on /102 and /152 in PP01/2025

Anyone having a similar scenario to get negative inflow from prior year into current year and implemented any solution to ensure the correct taxes are calculated according to the earnings displayed on the pay statement?

Thanks,

Mitesh

[KapilKurapati]

@miteshjain- Were you able to resolve the issue?

We have similar issue with cross-year payroll. I saw in your comments on the other thread that you were able to bring the earnings forward from prior year.

Please let me know what has to be done to get the prior year earnings to current year period and to make it to regular taxable income. Appreciate your help.