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In simple terms, back pay is the specific amount of salary or any type of compensation that an employee has earned but not yet received.
In many cases, employees don’t get their deserved salary or benefit from the company in time. As a result, the employer or the company is legally bound to pay back all the remaining compensation to the employee. This certain amount of unpaid compensation is called back pay which can include bonuses, commissions, salary, etc.
The components of back pay are mostly determined and controlled by the payroll process of the human resource department of the company.
If any employee is owed back pay, you have to go through some paperwork for allocating the payment from the right budget. You also need to properly check if overtime salary or other benefits need to be paid to an employee at that time. Besides, you need to make sure that you’re allocating the back pay for the accurate time period as well.
There can be several reasons for back pay including:
If an employee is not able to complete a single job because of external reasons from the company, they can be entitled to back pay. For example, if an employee was fired by an employer in an unfair manner, the employee can recover the money for the time they weren’t able to work.
If an employee is unfairly terminated or fired by an employer, the employee should be able to collect back pay because of this wrongful termination of the job.
Often employers are unable to pay employees the minimum wage set by the authority. So underpaid workers are also entitled to back pay in many cases.
Although retroactive pay and back pay share some similarities, there are some major differences between them. For instance, back pay is the employee’s remaining salary that is yet to be paid by the employer.
On the contrary, retroactive pay is the gap between the actual salary and the rightfully deserved salary. For example, if an employee gets paid for all of their working hours, but inaccurately, it’s can be called retroactive pay. But if an employee doesn’t get paid for their working hours or other benefits in due time, the due salary can be considered back pay.
It should be noted that the Fair Labor Standards Act (FLSA) fully supports back pay. If a company fails to pay the due salary of an employee, the company will be violating the Fair Labor Standards Act.
The act contains several components that allow the employee to recover their due salary including:
