What is retro pay mean?

Retro pay refers to the difference between the wages an employee was actually paid during a period of time and the amount of compensation they should have been paid based on a higher rate. This usually occurs when there is a retroactive increase in wages or when there is a mistake in the payroll system that results in underpayment.

Retro pay can also be the result of a collective bargaining agreement, where a pay increase is negotiated but takes effect after the expiration of the previous agreement, leading to retroactive payment of the increased wages.

Employers are generally required by law to provide retro pay to employees when it is owed, and failure to do so can result in legal consequences. It is important for both employers and employees to keep accurate records of hours worked and wages earned to ensure that retro pay is calculated correctly.

Retro pay can be a significant financial impact for both employers and employees, so it is important for both parties to carefully review and verify the calculations to ensure accuracy.