Arrears

An arrear is a payment that was due in a previous period but hasn’t been made yet. In payroll terms, it refers to salary or wages owed to an employee that weren’t processed on time.

Arrears arise for a few common reasons. Payroll runs on a cycle, and when that cycle is delayed, the payment due in one period carries over to the next. Salary revisions backdated to an earlier date create arrears for the gap between when the revision took effect and when it was actually processed. Payroll errors, where an employee was underpaid or missed entirely in a previous run, also result in arrears that need to be cleared in the current cycle.

It’s worth noting that most payroll systems run in arrears by design. Salary for a given month is typically calculated using that month’s attendance data, which isn’t fully available until the month ends. So the payment follows the period it covers, rather than running alongside it.