What is Back pay?

In any organization, employees are entitled to a variety of forms of compensation that make up for any past underpayments of salary, bonuses, incentives, or prizes. And to fairly progress, an employee is given back pay for past jobs done.

How is back pay calculated?

Except when it is for a pay rise, in which case it should be based on the new wage rate, back pay is computed at the same rate as a regular paycheck. The Fair Labor Standards Act (FLSA) has mechanisms for obtaining back pay, including minimum and overtime wages that have not been paid.

Reasons for Back Pay

Typically, back compensation is ordered in response to claims of wrongful dismissal. However, regardless of whether the violation was intentional, you may be entitled to back pay for any kind of underpayment. However, underpaid workers, subjected to discrimination, or passed over for promotions may also be eligible for back pay. Other explanations why you might be due back pay include:

a) Breaches of the minimum wage

b) Overtime without pay

c) Unpaid commissions or bonuses

d) Tip theft and wage theft

e) Misclassification (categorizing hourly workers as salaried workers)

f) Pay disparity or promotion discrimination (for example, if you are passed over for promotions due to membership in a protected class).

g) Accounting mistakes

Back Pay vs. Retroactive Pay

Similar to back pay, retroactive pay is money that an employer owes a worker for already completed work. Retroactive compensation compensates for underpayments, whereas back pay is for unpaid work. To put it another way, retroactive pay is the difference between what was paid and what was due.