Retroactive pay can be used in the following situations to correct: You can use retro pay to correct an employee’s rate of pay or salary for previous wages. Retro, or retroactive pay, makes up the difference between the wages an employee should have been paid and the wages an employee was actually paid. Include back pay wages on the next regular paycheck.Run a separate payroll for the missed wages.If you need to give an employee back pay, you can: You can pay an employee back pay if you forgot to pay them for overtime, the correct amount of hours, or for a bonus or commission. In short, back pay is when you pay an employee missed wages that you should have paid them in the first place. Back payīack pay is compensation you owe an employee when you don’t pay them their wages. So, when do you need to give employees back or retro pay? How do you calculate retro and back pay? Check out how back pay and retro pay differ below. Although they both involve paying an employee past wages, they are vastly different. However, retro and back pay are not the same. Many business owners think that back pay and retro pay are interchangeable. retro pay and whether or not you’re responsible for providing them to your employees. If you make a mistake or forget to pay an employee certain wages (e.g., bonus), you might need to provide retroactive or back pay.

And if you’re an employer, you’ve probably made (or will make) a payroll mistake at some point.

Retroactive vs retrospective