Work and Employment
Back Pay Explained: What is Back Pay? + How to Calculate
Back pay is the money you're owed for work you've already put in but haven't been paid for yet. In this guide, we break down what is back pay, the laws that protect you, how to figure calculate back pay, and we'll answer common questions you might have.
By:
Chelsea Spinos
Reviewer:
Timothy Lenahan, Esq.
8 min read • April 16, 2024
Key takeaways
Back pay is the amount of money you're owed for past work that wasn't paid on time.
Common reasons an employee might receive back pay include unpaid commissions, unpaid overtime, missing wages, not being paid minimum wage, and more.
Under FLSA, there are certain laws in place for overtime and minimum wage. If your employer violates one of these laws, you may be eligible for back pay.
If you’re in a situation of not being paid your commissions or for overtime, our unpaid wages lawyers can help you.
In this guide, we explain what is back pay, the difference between back pay vs retro pay, federal and New York State laws around back pay, how to calculate back pay, and more.
Back pay is money you should have received for work you've already done but haven't been paid for yet. It can happen if there's been a delay in getting your paycheck, if there's been a mistake, or if there are changes to your pay that need to be sorted out.
Essentially, back pay is what your employer owes you for the time you've already put in at work. Back pay may also apply to overtime you have worked or breaks you should have received that you didn’t. It can also include back pay for unpaid vacations or holidays.
Back pay and retro pay are both types of compensation for work done in the past, but they have some key differences.
Back pay meaning
What is back pay?
Why does back pay occur?
Why might someone be eligible for back pay?
Back pay is money you should have received for work you've done in the past but haven't been paid for yet.
It usually happens because of mistakes in payment or delays in getting your paycheck. Back pay can include your regular wages, overtime pay, commissions, bonuses, vacations, breaks or benefits that you were supposed to get but didn't.
You might get back pay if there's been a problem with how your employer paid you, and it's often sorted out through legal processes.
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Retro pay meaning
What is retro pay?
Why does retro pay occur?
Why might someone be eligible for retro pay?
Retro pay, or retroactive pay, is when you get extra money for work you did in the past because your pay rate changed.
This could happen if your employer raises your pay or changes your benefits, and they apply those changes to a time period before they actually made the change.
It's a way to make sure you're paid at the new rate for the work you did before the change happened.
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💡 Manifest Tip: In short, back pay is about getting what you're owed for past work, while retro pay is about adjusting your pay rate for work you've already done. Both are meant to make sure you're fairly paid for your time and effort!
Curious about whether you're entitled to back pay? Let's break it down with some common scenarios where you might be owed back pay.
Simply put, back pay usually comes into play when you haven't received the correct payment for the work you've done. This could be either because of legal rules or promises made by your employer.
Here are a few situations where you might be owed back pay:
Scenario
Minimum wage violations
Unpaid overtime
Unpaid commissions
Unpaid vacations
Unpaid breaks
Missing wages
Delayed pay raises
Unauthorized deductions from your paycheck
Being wrongly classified as a contractor
Discrimination in pay or promotions
Accounting mistakes
Why you might be owed back pay
If your employer pays you less than minimum wage set by the federal law, they may be violating laws set by the FLSA or state.
If you’re a non exempt employee and work beyond the standard 40 hour work week, you should receive 1.5x your regular pay for every hour worked overtime.
If you didn’t receive the right compensation for commissions, and it’s clearly defined in your contract, you could be eligible for back pay.
If you were entitled to paid vacations according to your employment contract, company policy, or labor laws, but didn’t get paid, you could receive back pay.
If your employer doesn’t allow required breaks, it can potentially violate labor laws. In these cases, you'd be entitled to back pay.
If you have missing wages from situations of underpayment, unrecorded hours, or delayed payments, back pay could be used to recover wages.
If your employer fails to pay you on time, whether it’s a result of processing delays, budget constraints, performance reviews, or policy changes, you may be eligible for back pay.
If your employer deducted money from your pay without your explicit authorization or legal justification, back pay could recover losses.
Employers sometimes misclassify employees as contractors to avoid providing certain benefits. If you’ve been misclassified, you could get back pay depending on the case.
If you were unfairly treated based on a protected characteristic such as race, gender, religion, age, or disability, you could be owed back pay to make up for the difference in wages depending on your situation.
If errors in the calculation or processing of your pay resulted in you being underpaid, you could receive back pay.
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If you’ve found yourself in any of these scenarios, it's crucial to know your rights and take steps to claim the back pay that rightfully belongs to you. Our employment lawyers at Manifest Law can help you out.
Understanding employment law can be tricky, but let's simplify things and break down the rules about back pay and retro pay. These laws are designed to ensure you're paid fairly for your work and offer solutions if you're not getting what you're owed.
By understanding your rights, you're better equipped to take the action to get any back pay you rightfully deserve. Now, let’s dive into the laws around back pay!
FLSA and back pay
The Fair Labor Standards Act (FLSA) is a federal law designed to protect workers' rights across the United States. Back pay often comes into play with the FLSA, especially when there are issues with wages and hours.
The FLSA sets a minimum wage that employers must pay their employees. If you're not paid at least this amount, your employer may owe you back pay to make up the difference.
If you work more than 40 hours in a week, the FLSA says you should get paid extra for those extra hours. If your employer doesn't pay you overtime pay when they should, they might owe you back pay for those hours.
Employers are required to keep accurate records of how many hours you work and how much you're paid. If they don't keep proper records or make mistakes, it could affect whether you get the right amount of back pay in case of a dispute.
If you think you're owed back pay under the FLSA, you can consider legal action to get the compensation you deserve.
Reach out to get an evaluation the strength of your case.
Minimum wage laws and back pay
These laws make sure you're paid a fair minimum hourly rate for your work. If your employer pays you less than this minimum, they might owe you back pay to cover the difference. Just remember, the minimum wage can vary depending on where you live.
Overtime pay laws and back pay
If you work more hours than a set limit in a week, you may be eligible to get extra pay for those extra hours. If your employer doesn't give you this extra pay when they should, they could owe you back pay for those extra hours worked.
Unpaid commissions laws and back pay
If you're owed commissions for work you've done, there are laws to protect you. Commission arrangements typically fall under contract law. This means that if there's a written agreement detailing your commission terms, your employer is legally bound to honor those terms.
Additionally, different states and jurisdictions might have specific laws around commission agreements. If you're worried about unpaid commissions, it's crucial to reach out to an employment lawyer. They can assist in reviewing your situation and pursuing any owed payments, which could be recovered as back pay.
Wage and hour laws and back pay
These laws cover different aspects of your job, like breaks and the number of hours you can work in a day or week. Employers have to follow these rules, and if they don't, they might owe you back pay for any violations.
Equal pay laws and back pay
These laws make sure everyone gets paid fairly for doing the same work, regardless of things like gender or race. If your employer pays you less than someone else for doing the same job, they might owe you back pay to make things right.
Reach out to get an evaluation the strength of your case.
While the FLSA laws protect your rights as an employee, the NYLL (New York State Labor Law) often offers even stronger protections. By law, employers in New York must follow laws that offer greater protections to employees.
Minimum wage and overtime pay
When it comes to things like minimum wage and overtime pay, the employer will need to pay their employees the higher wage, whether that’s the NYLL minimum wage or FLSA.
Here are the current minimum wage rates for New York as of January 2024:
Location
New York City
Long Island & Westchester
Rest of New York State
Minimum Wage as of 1/1/2024
$16.00
$16.00
$15.00
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NYLL requires eligible employees to be paid overtime pay if they worked beyond the standard 40 hour workweek. Overtime pay is calculated as 1.5x the regular rate earned by the employee, also known as “time and a half pay”. If your employer doesn’t follow through in paying you for overtime, you may be entitled to receive back pay.
Unlawful deductions
If an employer of New York state took money out of your paycheck without your permission, you might be owed back pay. The exception to this rule is if the dedication was allowed by the law.
Final paycheck
When you leave a job in New York, whether you get fired or voluntarily leave, the NYLL has certain rules about when you must receive your final paycheck.
Generally, you should receive your final paycheck on the usual payday for the pay period when you left the company. However, in the case of not having a regular payday, the employer must give you your paycheck within 5 business days of the termination.
If your employer doesn’t give your last paycheck in accordance with the law spelled out by NYLL, you may be entitled to back pay.
Wage Theft Prevention Act (WTPA)
The Wage Theft Prevention Act (WTPA) is a law specific to New York State that aims to protect workers from instances of wage theft and ensure they are paid both fairly and on time.
When you start a job, your employer is required to give you a pay notice that details out your pay. If anything changes later on, your employer must update the information on the pay notice. Also, each time you’re paid, you must be provided with a clear statement showing exactly how much you earned and any deductions.
For more information, you can check out the Wage Theft Prevention Act FAQs here.
Now that we’ve covered many of the laws related to back pay, let’s take a look at some real-life examples of situations where an employer was entitled to back pay.
Our client Maria works as a salaried employee at a marketing firm. However, she performs duties that are more akin to non-exempt hourly employees, such as administrative tasks and routine clerical work.
After consulting with our team, Maria discovered that she has been misclassified as exempt from overtime pay when, in fact, she should have been classified as non-exempt.
As a result, Maria was entitled to back pay for overtime hours worked beyond 40 hours per week, along with additional penalties for the misclassification.
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Our client Jessica is a nurse at a hospital where annual performance evaluations determine salary increases. After receiving positive performance evaluations for two consecutive years, Jessica was promised a raise of $12.00 per hour. However, due to budget constraints and administrative delays, the wage increase was not implemented until six months later.
We determined that she had been underpaid for the previous six months and was entitled to back pay for the wages she should have received with the raise, along with penalties for the delay.
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David is a construction worker who was hired by a contractor to work on a public construction project. The project was subject to prevailing wage laws, which require contractors to pay workers the prevailing wage rates for their trade in the locality where the work is performed.
However, David discovered that he has been paid below the prevailing wage rate for his trade throughout the duration of the project.
David reached out to our team and we filed a complaint with the Department of Labor, seeking back pay for the difference between what he was paid and the prevailing wage rate. He also received an additional settlement for penalties related to the contractor's non-compliance with prevailing wage laws.
Manifest Law©️. Learn more on www.manifestlaw.com
Calculating back pay can vary depending on your specific situation, but here's a general overview of how it's typically done:
Step 1: Determine the unpaid wages
Start by figuring out what payments you haven't received from your employer. This could be regular wages, overtime, bonuses, or anything else you should have been paid but weren't.
Step 2: Calculate the amount owed
To calculate your regular wages, simply multiply your hourly rate by the number of hours you worked. For overtime hours, use a rate of 1.5x your regular rate for each hour worked beyond the standard workweek.
This is commonly referred to as "time and a half." You can easily determine the total amount owed using our time and a half calculator.
Step 3: Consider Interest and Penalties
Sometimes, you might be owed back pay for late payments. This could include interest or penalties, especially if your employer broke any rules about paying you on time.
Step 4: Factor in Taxes and Deductions
Remember that your final back pay payment will likely be after taxes and deductions. Make sure to take this into account when calculating how much you should get.
Step 5: Check Your Records
Look through any paperwork you have, like timesheets or pay stubs, to make sure you have all the information you need for your back pay calculations.
If your situation is complicated or you're not sure how to calculate your back pay, don't hesitate to seek advice. Our team at Manifest Law can help you figure out the right amount.
Reach out to get an evaluation the strength of your case.
By keeping thorough documentation, you'll be better prepared to support your back pay claim and provide evidence of your entitlement to unpaid wages.
Here are some documents you should keep to support your back pay case:
Pay slips
Time records
Employment contracts or agreements
Performance reviews or evaluations
Correspondence related to back pay
Collect all pay stubs or wage statements from the period for which you believe you are owed back pay. These documents show your earnings and any deductions made by your employer.
Keep records of your work hours, including timesheets, clock-in/out records, or any other documentation that proves the hours you worked.
If you have an employment contract or any written agreements regarding your wages, benefits, or working conditions, keep copies of these documents.
If your back pay claim is related to a promised raise or bonus based on your performance, keep copies of any performance reviews, evaluations, or documents that show your eligibility for the increase.
Save any emails, letters, or other written communications between you and your employer regarding your wages, hours worked, or any disputes related to back pay.
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If you're unsure about what specific documents to keep or how to proceed with your back pay claim, our team of employment lawyers is here to offer advice tailored just for you.
Now that you know what is back pay and how to calculate back pay, let’s take a look at some frequently asked questions.
The timeframe for an employer to pay back pay can really vary depending on the specific circumstances and applicable laws. Employers typically need to pay back pay promptly once any issues are resolved or a decision is made in your favor.
For example, if an employer is found to have violated wage and hour laws, they may be required to pay back pay within a certain timeframe specified by the relevant regulations or court order.
Typically, you should expect to receive your owed wages within a reasonable timeframe, usually within a few days to a few weeks, depending on the situation.
If you're unsure about the timeline or have concerns about not receiving your back pay, it's a good idea to reach out to a legal expert or government agency for guidance on your rights and next steps.
In general, there's a two-year statute of limitations for claiming back pay. However, if the violation is considered willful, meaning the employer knowingly or intentionally violated wage and hour laws, the statute of limitations extends to three years.
This means that employees typically have up to two or three years from the date of the violation to file a claim for back pay, depending on whether it was willful or not.
If you're promised a raise but your employer delays giving it to you, you might be eligible for back pay. In this situation, back pay would compensate for the wages you would have earned if the raise had been implemented on time.
The first step you should take is to review your employment contract or agreement. Look for any language specifying when raises should be given and how they should be calculated. The next step would be to document any evidence of the delay, which could be emails, or written notices.
While you could request back pay directly from your employer, it can be especially helpful to consult with an employment lawyer.
The length of a back pay case can vary depending on different factors such as how complicated the situation is and whether both sides can come to an agreement quickly.
Typically, it will take between 3 to 6 months from case open to case closed if it doesn’t go to trial. Cases that go to trial take much longer than that and can last for years.
Sometimes, if things are straightforward and everyone agrees on what's owed, it might only take a few weeks to sort everything out.
But if things get more complicated, like if the case goes to court or there are a lot of details to figure out, it could take longer – possibly several months or even years.
After reaching a settlement, the time it takes to get your back pay can vary based on different factors like the complexity of your case and the agreed-upon terms.
Sometimes, you might receive your owed wages shortly after the settlement, while other times it could take a few weeks or even months for the payment to come through.
Generally, employers are expected to fulfill their part of the settlement within a reasonable timeframe, as outlined in the agreement or by law.
Yes, back pay is taxed just like your regular wages.
When you receive back pay, it's considered income by the IRS, so you'll need to pay taxes on it.
Your employer will withhold federal income tax, Social Security tax, and Medicare tax from your back pay, just like they do with your regular paycheck.
Your employer will report the back pay on your W-2 form, which you'll use when filing your taxes. It's important to know that if your back pay includes any interest, the tax rules for that portion might be a bit different.
Yes, back pay can be held back in certain situations, but it must be for valid reasons and follow the law. Common reasons why back pay might be delayed include:
Disagreements: If there's a disagreement between you and your employer about how much back pay you're owed or if you're owed any at all, they might hold off on paying until the issue is resolved.
Administrative Issues: Sometimes, mistakes or delays in paperwork or processing can cause a delay in getting your back pay. Your employer should let you know if this is the case and work to fix it as soon as possible.
Financial Problems: In rare cases, your employer might claim they can't afford to pay you right away. However, they need to have proof that they're facing genuine financial difficulties.
Legal Orders: If a court tells your employer to hold back your back pay as part of a legal decision or agreement, they have to follow those instructions.
Understanding back pay is key to making sure your hard work doesn't go unrewarded.
Whether it's fixing mistakes in your paycheck, sorting out unpaid wages or unpaid overtime, or dealing with employment contract issues, back pay is all about making sure you get what you've earned.
If you're facing any challenges with your back pay, our team of expert employment lawyers at Manifest Law is here to support you every step of the way.
We'll help you understand your rights, gather the necessary documentation, and handle all communication with your employer. Let us take the stress out of your case.
Schedule a free same-day consultation today.
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