Back Pay

It is the policy of the State of North Carolina to comply with all applicable federal and state regulations regarding back pay.

State Personnel Manual - Section 7 - Discipline/Appeals/Grievances 

The State Personnel Manual - Section 7 governs the State's policy on back pay.

Back pay shall be determined by computing the gross pay which the employee would have earned during the period specified for back payment in the grievance decision or settlement agreement of State Personnel Commission order. This gross pay amount shall be reduced by any interim income and/or unemployment compensation received by the employee during the back pay period as a result of the loss of employment. Earnings derived from approved secondary employment which the employee received prior to and/or during the specified period will not be deducted from the gross earnings amount.

The agency Personnel Office is responsible for submitting Form PD-14, Statement of Back Pay, and a copy of the settlement agreement to the agency Payroll Office.  Back pay is processed on a special payroll that uses the employee's tax withholding elections and can be processed on any of the four payroll pay dates. Back pay must be recorded to account 531624, Grievance Settlement. 

All applicable state and federal withholding taxes shall be paid from the reduced gross earnings, calculated as gross earnings less any reductions for interim income or non-approved secondary employment compensation.

The back pay is not subject to retirement contribution, but because the Retirement System may add penalties and interest to the back pay award, 6% of the unreduced back pay amount is deducted under deduction code 052, REIMB FROM EMP. The Central Payroll Division issues a paper check to the agency for the amount of the retirement deduction.  The deposit of the check should be coded to the agency discretionary account 2138AA, Payables Clearing.  The Retirement System is notified of the employee's back pay and an invoice is received from the Retirement System assessing the total amount due to the Retirement System, including any penalties and interest. A request is issued to the Accounts Payable section for the disbursement of the amounts owed. Payments made to the Retirement System must be coded as follows:

The employee's pay is reduced by the amount of any unemployment received by applying the amount of unemployment as a deduction coded to deduction code 907, UNEMP BEN REIMBURSMENT.

The Central Payroll Division issues a paper check to the agency for the amount of the unemployment. The deposit of the check should be coded to the agency discretionary account 2138AA. A request is issued to the Accounts Payable section to reimburse to the Employment Security Commission (ESC) any unemployment benefits that were received by the employee.  Payments made to the ESC must be coded to the same account used for the deposit, 2138AA Payables Clearing.

The only other miscellaneous deductions allowed from back pay awards are garnishments.

This policy applies to all State entities.

There are no exceptions to this policy.

There are no special terms for this policy.