What is back pay meaning?
Back pay refers to any form of the unpaid financial compensation that the company owes the employee. It makes up any discrepancy between the employee and the employer and what the employer was required to pay according to the law under minimum wage and overwork guidelines.
Sometimes employees earn back pay salary after receiving a salary increase that may take time for some payroll systems to process, sometimes it happens when the employee was wrongly terminated from certain positions, it may also include hourly wages, overtime, bonuses, commissions and always associate with the penalty an employer must pay as the result of a wage violation case.
What is the difference between back pay and retroactive pay?
Though the term back pay and retroactive pay is not strictly defined, people would like to use these differently depending on the scenarios.
Like what we had explained above, the back pay salary is the wage that the company still needs to pay to the employee for the work that had already been performed. However, retroactive pay could rectify errors such as the payroll mistakes. For example, a miscalculation of an employee’s wage compared with the previous paycheck they received.
Back pay and the employment ordinance in HK
According to the employment ordinance, an employer should pay wages to an employee when they become due and not later than 7 days from the end of the wage period.
If the employer who fails to pay wages to an employee within the given period after they become due is liable to prosecution and, upon conviction, to a fine of HK$350,000 and to imprisonment for three years and requires to pay interest on the outstanding amount of wages to the employee.
Workstem
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