FMX Home
Glenn Hegar  ·  Texas Comptroller of Public Accounts

General Provisions
Correcting Underpayments of Compensation

State agencies and institutions of higher education must ensure that their internal operating procedures have quality control measures that detect when their employees have been underpaid.

Adjusting for Underpayments of Compensation

When an agency or institution of higher education discovers an employee has been underpaid, the agency or institution must correct the employee’s compensation no later than the following pay period.

The agency or institution can make the adjustment on the subsequent monthly payroll if no hardship would be imposed on the employee. However, if the employee would face difficulties in waiting, a supplemental payroll must be used to correct the underpayment.

The agency or institution must ensure that the adjustment plus the previous incorrect payment totals the amount that the employee was due for that pay period.

back to top

Calculating the Hourly Rate for the Adjustment

Agencies and institutions of higher education will use the hourly rate of pay that was in effect during the pay period the hours were worked. Hourly rates will vary from pay period to pay period depending on the number of working hours in each period.

Note: A workday means any day except Saturday or Sunday.

The hourly rate for state agency employees is computed by:

Dividing the base annual salary by 12, then dividing that number by the number of hours that would be worked in that month by a 40-hour-a-week employee.

Base annual salary does not include:

  • Longevity pay,
  • Hazardous duty pay,
  • Benefit Replacement Pay (BRP), or
  • Other emoluments that are sometimes paid using the salary expenditure object.

Institutions – alternate method for calculating hourly rate

In addition to the method listed above, institutions of higher education may choose to compute the hourly rate by:

Dividing the employee’s annual salary by 2080, the number of working hours in a standard work year.

Institutions – choose only one method of computing hourly rate

The method an institution of higher education chooses to compute an employee’s equivalent hourly rate of pay must be used for all underpayment types within the institution.

back to top

Required Adjustments to Accumulators

State agencies and institutions of higher education that correct an underpayment of compensation must adjust all relevant payroll accumulators, such as:

  • Agency-paid taxes
  • Employee-paid taxes,
  • Limits on benefit replacement pay (BRP), and
  • Deferred compensation.

Agencies must maintain appropriate supporting documentation for the adjustment.

back to top

Supporting Documentation for Adjustments/Corrections

State agencies and institutions of higher education that correct an underpayment of compensation must retain supporting documentation that contains the following information:

  • the amount of the underpayment
  • the pay period for which an underpayment occurred
  • the pay period for which compensation is increased to eliminate the prior underpayment
  • the number of working hours that is being used to calculate the underpayment if it was caused by paying the employee for fewer hours than the number of hours actually worked.

To learn more about processing underpayments of compensation, see Chapter 8 “Payroll Processing” of the USPS Process Guide or the SPRS Payroll Edits.

back to top

Sources

Texas Government Code Annotated, Section 659.006 (Vernon 2004); Texas Administrative Code, Section 5.40.

Glenn Hegar
Texas Comptroller of Public Accounts
Questions? Contact statewide.accounting@cpa.texas.gov
Comptroller.Texas.Gov | FMX
FMX Sitemap | Contact FM
Accessibility Policy | Privacy and Security Policy