What is a supplemental check?

A supplemental check includes payment items such as vacation pay, bonuses, commissions, and dismissal pay. These payments are paid at a different time from the regular payroll. The decision to pay the supplemental wage as an extra check or include it as part of the paycheck is up to you.

These payments are typically one-time or irregular in nature and are often used to compensate employees for things like bonuses, commissions, overtime, or corrections to previous payroll errors.

Examples of supplemental checks:

Bonus payments. If an employee is receiving a bonus or incentive pay separate from their regular payroll check, a supplemental check ensures these payments are processed correctly, often with a different tax withholding rate.
Expense reimbursements. If an employee is getting reimbursed for business expenses, a separate check may be needed to avoid mixing taxable and non-taxable payments.
Correction of payroll errors. If a mistake occurred ina previous payroll check (for example, mixxing overtime or underpayment), a supplemental check allows for quick correction without waiting for the next payroll cycle.
Severance or special payments. Payments like severance, retroactive pay increases, or settlement payments are sometimes processed separately for tracking and tax purposes.
Different tax treatment. The IRS allows flat-rate withholding (22% for federal taxes in the U.S.) on supplemental wages, which may differ from the employee's regular withholding method. This is useful when processes bonuses or lump-sum payments.
Manual payroll adjustments. If an automated payroll settings don't support a specific payment scenario, an override allows manual adjustments to ensure accurate pay.