The term back pay refers to the difference between the amount of wages paid an employee and the amount owed an employee. Back pay is owed an employee if the hourly wage rate paid was too low, or the number of hours paid were too few.
Back Pay = Wages Owed Employee - Wages Paid Employee
Also referred to as backpay, employers may owe back pay to an employee as a result of a failure to comply with, or an error occurs in, the payroll administration process. When a wage violation occurs, an employer is required to provide the difference between the wages owed the employee and the wages paid to the employee. Circumstances that may warrant back pay include:
Normally, a two-year statute of limitations applies to the recovery of back pay; however, in cases of willful violations, a three-year statute of limitations may apply.