Glossary
What are salary arrears?
What salary arrears are, why a back-dated raise creates them, and how to pay them on the current month's payslip.
Updated
In short
Salary arrears are pay owed to an employee for past months, most often from a raise that takes effect from an earlier date. In SimpleERP you add arrears as their own payslip line in the current month.
Salary arrears are amounts owed to an employee for earlier pay periods that were not paid at the time. They most often arise when a raise is approved with an effective date in the past, and also from a pay error or a delayed revision. Arrears are worked out month by month as new pay minus old pay, then paid as a separate earning in the current month.
Salary arrears: a worked example
In October 2026, Lakshmi Steel Furnitures raises Karthik R's Basic from ₹18,000 to ₹19,500, effective 1 August. HRA is 40% of Basic, so it rises from ₹7,200 to ₹7,800. August and September were already paid at the old rate.
| Month | Basic difference | HRA difference | Arrears |
|---|---|---|---|
| August 2026 | ₹1,500 | ₹600 | ₹2,100 |
| September 2026 | ₹1,500 | ₹600 | ₹2,100 |
| Total paid in October | ₹3,000 | ₹1,200 | ₹4,200 |
FAQ
Questions, answered
How are salary arrears calculated?
For each past month the new pay applies to, take the new amount of each component minus what was paid, after any loss of pay in that month. Add the months together. Percentage components such as HRA and PF follow the change in Basic.
Is PF deducted on arrears?
Arrears of Basic and dearness allowance are commonly treated as wages for PF, so PF is due on them. Arrears of other allowances may not be. Check the current rules with your CA.
Are arrears taxed in the year they are paid?
Arrears are taxable when received, which can push income into a higher slab. The Income Tax Act offers relief for arrears relating to earlier years, as notified. This is not tax advice; ask your CA.
Why doesn't SimpleERP recalculate past months after a raise?
An approved payroll run has posted its journal and its payslips are with employees, so the database freezes it. A new structure with an earlier effective date applies to runs created from now on, and the difference for past months is paid as an arrears line.
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