Back pay is money that an employer owes an employee for work that was completed in the past. This can happen for a number of reasons, such as if an employee was not paid for overtime hours or if they were paid less than minimum wage. Back pay can also be awarded as part of a settlement if an employee wins a lawsuit against their employer.
To calculate back pay, you will first need to determine the employee's regular rate of pay. This is usually the hourly rate that they were paid, but it may be higher if they receive commission or bonuses.
Once you have determined the regular rate of pay, you will need to multiply it by the number of hours that the employee worked. For example, if an employee worked 40 hours per week for a total of 10 weeks, then they would be owed 400 hours of back pay at their regular rate of pay.
Back pay is calculated retroactively from the date that the original pay period began. For example, if an employee normally gets paid bi-weekly but did not receive their paycheck for the previous two weeks, their back pay would be calculated from the date of the last paycheck they received.
When an employee receives back pay, it will show up as a separate item on their payslip.