Off-Cycle Payroll & Corrections

Regular payruns follow a predictable monthly schedule. However, situations arise that require salary payments or adjustments outside the standard cycle — a performance bonus awarded mid-month, a correction to a processed payroll error, a final settlement for an exiting employee, or a contractor payment. Udyamo HRMS handles these through the Off-Cycle Payroll feature.

This chapter covers creating off-cycle payruns, processing one-time payments, correcting payroll errors, and managing the approval workflow for ad-hoc payments.

What You Will Learn

• What off-cycle payroll is and when to use it
• How to navigate to the Off-Cycles section
• How to create an off-cycle payrun
• How to set up one-time payments (ad-hoc earnings and deductions)
• How to process contractor payments
• How to correct errors in processed payroll
• How the reversal process works
• The approval workflow for off-cycle payments
• Off-cycle payrun status tracking

Prerequisites

Required: The Payroll module must be enabled and salary components must be configured. See Chapter 26: Salary Components. You must have an Administrator role. Familiarity with the regular payrun process is recommended. See Chapter 28: Running Payroll.

What Is Off-Cycle Payroll?

Off-cycle payroll refers to any payroll processing that occurs outside the regular monthly payrun schedule. It is used for ad-hoc, one-time, or corrective payments that cannot wait until the next regular payrun.

Common Use Cases

Off-Cycle vs. Regular Payrun

Navigating to Off-Cycles

To access the off-cycle payroll section:

1. Click Payroll in the left sidebar.
2. Select Off-Cycles (or Off-Cycle Payruns).

The Off-Cycles page lists all existing off-cycle payruns with their date, status, and summary.

Creating an Off-Cycle Payrun

To create an off-cycle payrun:

1. Navigate to Payroll > Off-Cycles.
2. Click Create Off-Cycle Payrun (or New Off-Cycle).
3. Fill in the payrun details:

4. Click Create.

The off-cycle payrun is created in Draft status.

One-Time Payments

A one-time payment (represented by the OneTimePayment model) is an ad-hoc earning or deduction that applies to a specific employee for a single payroll cycle. One-time payments are the primary mechanism for adding amounts to an off-cycle payrun.

Creating a One-Time Payment

1. Open the off-cycle payrun (in Draft status).
2. Click Add Payment (or Add One-Time Payment).
3. Fill in the payment details:

4. Click Save.
5. Repeat for each employee who needs a one-time payment in this cycle.

One-Time Payment Examples

Tip: When creating one-time payments, use descriptive component names that clearly identify the purpose. This information appears on the employee's payslip and serves as documentation for the payment.

Processing Contractor Payments

Off-cycle payruns can be used to process payments for contractors or consultants who are not on the regular payroll.

Steps for Contractor Payments

1. Ensure the contractor is set up in the system as an employee record (with appropriate designation, e.g., "Contractor" or "Consultant").
2. Create an off-cycle payrun with the type set to Contractor (or use a descriptive name).
3. Add a one-time earning for the contractor's payment:
   • Component Name: Contractor Fee — [Month/Project]
   • Amount: The agreed payment amount
   • Taxable: Yes (TDS under Section 194C/194J applies to contractor payments)
4. Process and approve the off-cycle payrun.
5. Generate bank advice for the contractor payment.

Warning: Contractor payments are subject to different TDS rates than employee salaries. Section 194C applies to contractors (1% for individuals/HUF, 2% for others) and Section 194J applies to professional/technical services (10%). Ensure the correct TDS rate is applied. Consult your tax advisor.

Effective Date Management

The Effective Date on an off-cycle payment determines:

• When the payment is recorded in the books
• Which month's tax calculation it affects
• How it appears in the employee's payslip history

Choosing the Effective Date

Tip: Using the correct effective date is especially important for TDS calculations. A bonus processed in January but effective for December may have different tax implications. Consult your payroll team or tax advisor when unsure.

Corrections to Processed Payroll

When an error is discovered in a processed (or paid) payrun, the off-cycle payrun is the mechanism for correction. The original payrun cannot be reopened or modified.

Common Correction Scenarios

Step-by-Step: Correcting an Underpayment

An employee's Special Allowance was incorrectly entered as INR 8,000 instead of INR 10,000 for December 2025. The difference of INR 2,000 needs to be paid.

1. Navigate to Payroll > Off-Cycles.
2. Click Create Off-Cycle Payrun.
3. Enter:
   • Name: Salary Correction — December 2025
   • Payment Date: January 15, 2026
   • Type: Correction
4. Click Create.
5. Click Add Payment.
6. Enter:
   • Employee: [Employee Name]
   • Payment Type: Earning
   • Component Name: Special Allowance Arrear — Dec 2025
   • Amount: INR 2,000
   • Taxable: Yes
   • Effective Date: December 2025
7. Click Save.
8. Process and approve the off-cycle payrun.

The employee receives INR 2,000 (minus applicable TDS) as a correction payment.

Step-by-Step: Recovering an Overpayment

An employee was paid INR 5,000 extra due to an incorrect LOP calculation in November 2025.

1. Navigate to Payroll > Off-Cycles.
2. Click Create Off-Cycle Payrun.
3. Enter:
   • Name: Overpayment Recovery — November 2025
   • Payment Date: January 2026
   • Type: Correction
4. Click Create.
5. Click Add Payment.
6. Enter:
   • Employee: [Employee Name]
   • Payment Type: Deduction
   • Component Name: Overpayment Recovery — Nov 2025
   • Amount: INR 5,000
   • Taxable: No (recoveries are not taxable events)
   • Effective Date: November 2025
7. Click Save.
8. Process and approve the off-cycle payrun.

Warning: Before recovering an overpayment via payroll deduction, inform the employee and get their acknowledgment. Surprise deductions can cause dissatisfaction and may have legal implications depending on your jurisdiction. Some states require written consent before making deductions from salary.

Reversal Process

In rare cases, you may need to reverse an entire off-cycle payment (e.g., a bonus was paid in error and needs to be fully clawed back).

Steps for Reversal

1. Identify the off-cycle payrun that needs to be reversed.
2. Create a new off-cycle payrun specifically for the reversal.
3. For each payment in the original off-cycle, create an opposite entry:
   • If the original was an earning, create a deduction for the same amount.
   • If the original was a deduction, create an earning for the same amount.
4. Process and approve the reversal off-cycle.
5. Document the reversal reason in the payrun description.

Tip: Always create a new off-cycle payrun for reversals rather than trying to modify the original. This preserves the audit trail and provides clear documentation of what was paid and what was reversed.

Approval Workflow for Off-Cycle Payments

Off-cycle payments follow the same approval workflow as regular payruns, with additional scrutiny due to their ad-hoc nature.

Approval Status Flow

Approval Flow

Draft --> Submitted --> Approved --> Approved & Paid
                    |
                    --> Rejected (back to Draft for correction)

What the Approver Reviews

Warning: Off-cycle payments bypass the standard payroll calculation checks (attendance, leave, statutory limits). The approval step is the primary safeguard against errors. Approvers should review each payment carefully.

Status Tracking

Viewing Off-Cycle Payrun Status

1. Navigate to Payroll > Off-Cycles.
2. The list displays all off-cycle payruns with their current status.
3. Click on any entry to view details, including individual payment records and approval history.

Off-Cycle History

Off-Cycle Payment and Payslip Integration

One-time payments processed through off-cycle payruns appear on the employee's payslip record:

• If the payment effective date falls within a regular payrun month, it appears as an addendum or separate section on that month's payslip.
• If it is processed independently, it generates a separate payslip document for the off-cycle period.

Employees can view off-cycle payslips in the same My Payslips section alongside regular monthly payslips.

Off-Cycle Payment and Tax Integration

Off-cycle payments affect the employee's annual tax calculation:

The TDS worksheet (see Chapter 29) includes off-cycle payments in the cumulative calculations.

Tip: Large off-cycle taxable payments (e.g., annual bonus) can significantly impact an employee's monthly TDS for the remaining months of the fiscal year. The system automatically adjusts the monthly TDS to spread the additional tax liability evenly across the remaining months.

Bank Advice for Off-Cycle Payments

Off-cycle payruns generate their own bank advice files, separate from the regular payrun bank advice.

1. Open the approved off-cycle payrun.
2. Click Bank Advice.
3. Review and download the file.
4. Upload to the banking portal for processing.

The bank advice contains only the employees included in the off-cycle payrun, with their respective net payment amounts.

Troubleshooting

Best Practices

1. Minimize off-cycle usage. Off-cycle payments should be the exception, not the norm. If you find yourself running off-cycles frequently, consider whether the regular payrun process needs adjustment.
2. Document thoroughly. Every off-cycle payrun should have a clear description and each payment should have a descriptive component name. This documentation is critical for auditing.
3. Use separate off-cycles for different purposes. Do not mix bonuses, corrections, and contractor payments in a single off-cycle payrun. Separate them for clarity and audit trail.
4. Get approvals before disbursement. Never bypass the approval workflow, even for urgent payments. If the regular approver is unavailable, escalate to a backup approver.
5. Reconcile off-cycle payments with the regular payroll. At month-end, ensure all off-cycle payments are accounted for in your overall payroll cost reports and statutory calculations.
6. Communicate with employees. Notify employees when off-cycle payments (or recoveries) are being processed, especially if the amount is unexpected.

What Comes Next

This concludes Part 6: Payroll. With salary components, salary structures, the regular payrun process, payslips, bank advice, and off-cycle payments all covered, your payroll system is fully operational.

Proceed to Part 7: Statutory Compliance (India), starting with Chapter 31: EPF — Employees' Provident Fund.