Payroll

Retroactive Pay, in plain English.

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Retroactive pay is compensation owed for work already performed but paid at the wrong rate, usually following a backdated raise, a delayed promotion, a corrected classification, or a late contract settlement.

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It is calculated by re-running the affected periods at the correct rate and paying the difference. Retro pay is taxable in the period it is paid. Workzoom calculates it from effective-dated history rather than manual back-maths.

How Retroactive Pay works.

Retro pay depends entirely on effective dating. If the system records when a rate change took effect rather than only when it was entered, the difference across affected periods is computable rather than reconstructed by hand. The knock-on effects are what teams underestimate: a retroactive rate change also changes overtime already paid at the old regular rate, and it can change vacation pay accrued as a percentage of those wages. Statutory contributions recalculate on the corrected earnings too.

Where Retroactive Pay goes wrong.

  1. Paying only the base difference and ignoring the overtime recalculation is the most frequent shortfall, because overtime was computed on a regular rate that has now changed.
  2. The second issue is timing: retro pay is generally taxed in the period paid rather than the period earned, so a large catch-up can push withholding higher than the employee expects and generate a support call.
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How Retroactive Pay runs on Workzoom.

Retroactive Pay is part of the Workzoom Payroll Suite. Workzoom runs HR, workforce, and talent on a single employee record across ten countries: Canada, the United States, the Bahamas, Jamaica, Trinidad and Tobago, Barbados, Antigua and Barbuda, Anguilla, the Cayman Islands, and the United Kingdom. Full gross-to-net payroll runs live in Canada, the United States, and the Bahamas. Pricing starts at $4 per employee per suite per month.

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Related terms.

Questions about Retroactive Pay

A backdated raise, a delayed promotion, a corrected pay classification, or a late collective agreement settlement. In each case work was performed and paid at a rate later determined to be wrong, so the difference is owed.
Usually yes. Overtime is calculated on the regular rate, so a retroactive change to that rate means previously paid overtime was also underpaid. Paying only the base difference leaves a shortfall.
Retro pay is generally taxed in the pay period in which it is paid rather than the period in which it was earned. A large catch-up payment can therefore carry higher withholding than the employee expects.
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