Reverse or make corrections to a paid pay run

If a paid pay run has incorrect wages or taxes, you may be able to correct the error using the reverse pay run process. You can then create an unscheduled pay run to make the correct payments.

If you've set your employees to accrue hourly time off, the pay run reversal also reverses their accrued time off.

How it works

You can reverse most pay runs that have dates within the:

  • Current pay period
  • Next two future pay periods
  • Last eight historic or previous pay periods

You can't reverse pay runs that are:

  • Associated with deleted pay schedules
  • In draft status
  • Negative in value
  • Reversed already using the reverse pay run process

You also can't reverse pay runs that include a submitted direct deposit payment.

Xero can't cancel direct deposit payments that are awaiting payment. We recommend you contact your bank if you want to reverse these payments.

When reversing a pay run, you can select the employees whose pay you want to reverse. You can't reverse an employee's pay if:

  • You've already reversed it
  • Their paystub contains negative values
  • They're assigned to a different pay schedule than the one used in the pay run you want to reverse. For example, if you've recently changed an employee from a monthly to weekly pay schedule, you'll need to temporarily change them back to a monthly schedule to reverse the pay.
  • Their employment ended before the first day of the pay period you want to reverse. You'll need to temporarily change the employee's status to active to reverse the pay run.

Before you start

  • Check the opening balances for the pay run you'd like to back out. If you discover errors, add employee opening balances for the current quarter. You can fix almost all other pay run errors – such as miscalculating pay or taxes – by reversing the pay run.
  • Cancel any scheduled tax payments and revert tax filings for the dates of the pay run you want to reverse. If you've already paid taxes or filed tax returns for those dates, you may need to correct a tax payment.

Reverse a pay run

  1. In the Payroll menu, select Pay Runs.
  2. Select the pay run you want to reverse. Xero will post an alert if employees in the pay run are eligible for a pay reversal.

    Image of the alert on the pay run page.

  3. (Optional) To void an employee's check numbers:
    • Select the checkbox next to an employee's name.
    • (Optional) Click Memo to add a message to the amendment, then click Apply to confirm.
    • Click Void Check Numbers, then click Yes to confirm.
  4. Click Reverse Pay Run in the alert or under the Options menu. Xero will create a draft pay run.
  5. Select the checkbox next to an employee's name to include them in the reversal. Employees who are ineligible for a pay run reversal have a padlock icon Image of the padlock icon. next to their name. Xero displays why the employee is ineligible if you hover your cursor over the icon.

    Image of the checkbox and padlock icon.

  6. (Optional) Click the memo icon Image of the memo icon. to add a message to the employee's paystub, then click Apply.
  7. Click Reverse Employees, then click Complete Pay Run to confirm.
  8. Click Back to return to your list of pay runs.
  9. Adjust the previous payroll payment to correct the pay run.
You now need to reconcile the reversed pay run if you paid by direct deposit or check created in Xero.