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Back pay is the salary and benefits an employee is owed by an employer or a former employer after termination or change in salary or status. Back pay is the discrepancy between what an employee should have received and what they actually received, except when it is for a pay rise, in which case it should be based on the new wage rate. Back pay is computed at the same wage rate as a regular paycheck.
Back pay is also liable to the same taxes as an employee's normal paycheck because it was earned by them for the work they did. This is regarded as income by the Internal Revenue Service (IRS). A statute's definition of back pay differs from the common understanding of the term. An employee receives this kind of back pay in the amount they would have made, had their company complied with any of the following employment laws.
With the help of HR software or an HRIS, it’s fairly easy to calculate the Back Pay for an employee as it tracks and processes the number of hours worked by an employee, and hours paid for according to the pay policies defined within the HR management software. This information is then fed to the Payroll system of the organization, internal or external, for the smooth dispensing of salaries to employees.