What is retro pay?

Retro pay, short for retroactive pay, refers to payment that is owed to an employee for work done in the past but not previously compensated for. This can happen when a pay raise or adjustment takes effect after the time period in which the work was performed.

Retro pay can be the result of various situations, such as a pay raise that is delayed in implementation, errors in payroll processing, or changes in labor laws or company policies that necessitate backdated payment to employees.

Employers are generally required to provide retro pay to employees if they have not been compensated properly for their work. This is typically calculated based on the difference between the amount the employee should have been paid and the amount they were actually paid during the specified time period.

It is important for employers to communicate clearly with their employees about any retro pay owed and ensure that it is processed accurately and promptly. Failure to do so can lead to potential legal issues and disputes with employees.