Back Pay

Meaning & Definition

Back Pay is a salary that employees have already worked for and have not been paid on schedule or incorrectly. Back pay can happen due to payroll errors, delayed pay raises, wrongful termination, unpaid overtime, and court settlements. Back pay is the difference between the wages or salary that were actually paid to the employee and the amount that the employee should have been paid.

Significance of Back Pay

• Assures that Employees receive their proper salary on a timely basis.
• Assists in providing corrections for payroll mistakes as well as salary distributions.
• Provides businesses with protection from legal errors and fines.
• Establishes employee confidence through fair practices of compensation.
• Provides accurate agreement of payroll and reviews.

Compliance Requirements

Back Pay can come from Wage or Employment disturbances. 

To manage Back Pay, Organizations should have:

• Payroll correction & approval workflows.
• Employment Contracts, Salary Revision Policies, and Settlement Terms.
• Conflict Resolution or Grievance Correct Mechanisms.

Also, timely payment and proper documentation will help reduce the chance of escalation.