The corporate world is full of ups and downs. There may come a time when you receive less amount than what you were promised. This can be because of multiple factors. When you receive less than the promised amount, the employer owes you the rest amount. That amount is paid back through the backpay method. Now, you must be thinking what is backpay? The difference between the amount you were promised and the amount you received by the employer is known as back pay. This difference may arise due to several accidental as well as intentional reasons such as unlawful termination and natural causes. Backpay is a way for employers to rectify the errors committed in payment.
It is also known as back wages. If you did not receive the full amount that you were promised then you are entitled to back wages. But if you don’t know how back pay works, you will not be able to claim it. For claiming it, you must be aware of what is backpay and the reasons for it. If the part of your salary is withheld by the employer without your knowledge or permission then you are entitled to receive back pay. For example, if you give resignation from your company and have not been paid with the final check till the last working date, then you can claim back pay.
Sometimes, what happens is that you worked overtime but that is not recorded in the timesheet. In that case, you are entitled to get back pay and the difference will be calculated between the regular rate of the amount you were promised and the amount you should have received for the overtime. There are cases when taking legal action becomes necessary. It becomes compulsory when your employer is denying to pay the amount they owed to you. In that case, you can take the help of the Labour Laws in India, for instance, Workers Compensation Act, 1923, Payment of Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 etc. These acts protect the interest of workers. It has the provisions for recovering unpaid minimum wages, overtime wages and back pay. If you are aware of how back pay works and what laws are applicable in your location then only you will be able to take any legal action. However, you should always try to work out things peacefully.
Numerous reasons explain why an employee is entitled to get back pay. Here are some of the reasons listed below –
Employees are divided into two categories. First is that category in which employees are paid based on hours they work. They are usually known as hourly workers. Second is that category in which employees are paid fixed remuneration at a fixed period with other benefits. They are known as salaried employees. When an employee gets changed from hourly employee to salary employee, he is entitled to receive back pay or wages. For instance, you were working in a firm on an hourly basis. After a few months, your position gets changed and you become a salaried employee of the firm. Based on your previous employment category, your employer will pay you some additional amount.
There are many cases when an employee gets fired by the company wrongfully. Suppose, you are fired or terminated by the employer without your mistake then you can claim back pay. You can register a case against the company if you feel that the termination was not ethical. If the court finds that the company is on the wrong side and you were unnecessarily and intentionally targeted then it will order the employer to reinstate you. The back pay, in this case, will be calculated from the date of termination to the date the court gives its judgment.
There may come a situation when your employer forgets to pay the bonus, commissions you earned and overtime payment. In these circumstances, you can ask for the back pay. Sometimes, overtime work is not registered by mistake. Due to this error in the entry, you will not be paid by the employer for the overtime work done for extra hours by you. There may come situations when you did not receive the amount earned as a commission or your employer failed to pay it within the pay period. In these cases, you can claim backpay. Also, if you are eligible for a bonus payment but did not receive any, your employer will owe you back pay.
Suppose if the payment policy of the company gets changed in the last days of the pay period and you were expected to receive an increment in the salaries. But you get paid at the older rate of remuneration. In this case, you claim back pay and your employer will need to pay the difference to you. He can pay this back wage along with the next salary. In the case of salary increment, back pay calculated on the new salary rate.
If an employer acts unethically and intentionally creates situations that prevent you from performing your works and duties then you are entitled to back pay. You can ask for back wages for the period you were not allowed to work. Also, if the employer doesn’t pay the minimum guaranteed wages to the employees due to reasons such as natural calamities, increase in the number of employees etc, he is supposed to pay back wages without any failure. If they fail to do so, legal actions can be taken against him.
Backpay is the amount that the employers did not pay to the employees for the previous work. While dealing with matters related to the compensation of employees, things should be done with care and full attention. The HR representative should be aware of what is backpay to deal properly with the issue. If you know how backpay works then only you will be able to claim it. It is the amount that the employer owes to you and it is also subject to taxes same as the regular remuneration. You should be fully aware of the concept before claiming it to avoid any chance of mistake.