Retro Pay Calculator: Back Pay Owed After a Late Raise
Calculate retroactive pay owed when a raise or rate change was applied late, for hourly or salaried pay: rate difference, overtime catch-up at 1.5×, retro per pay period, total owed, estimated withholding and take-home, and a period-by-period schedule.
How it works
Hourly: retro per period = (new rate − old rate) × regular hours + (new rate − old rate) × 1.5 × overtime hours · Salary: retro per period = (new salary − old salary) ÷ pay periods per year · Total retro = retro per period × periods · Take-home ≈ total × (1 − 22% − 7.65% − state rate)
Retroactive ("retro") pay makes up the difference when an employee was paid at the old rate after a higher rate had already taken effect, most often because a raise or a new union contract was dated earlier than payroll applied it. For hourly pay the amount owed is the hourly difference times every hour paid at the old rate. Overtime hours need more: under the US Fair Labor Standards Act a retroactive raise increases the regular rate for the whole retro period, so each overtime hour is owed the difference times 1.5 (a 10-cent raise means 15 cents more per overtime hour). For salaried pay, divide the annual increase by the number of pay periods in a year (52, 26, 24 or 12) and multiply by the periods paid at the old salary. Retro pay is taxable wages. When it is paid in a separate run, US employers may withhold federal income tax at the 22% supplemental flat rate (37% above $1 million of supplemental wages in the year), plus 6.2% social security and 1.45% Medicare and any state tax; the optional estimate under More options shows that withholding and the take-home amount. The employer also owes its matching 7.65%. The calculator assumes the same hours in every affected period; if hours varied, enter the average or add the periods separately.
Worked example
A raise from $20 to $22 an hour applied three pay periods late, with 80 regular hours and no overtime per period: the difference is $2 an hour, so each period is owed $2 × 80 = $160 and the total is $160 × 3 = $480 over 240 hours. Paid separately, the estimated withholding is 22% federal ($105.60) plus 7.65% social security and Medicare ($36.72), or $142.32, leaving about $337.68 take-home. The employer’s cost with its own 7.65% FICA is $516.72.
Sources: IRS Publication 15 (2026), Employer’s Tax Guide: supplemental wages and FICA rates · 29 CFR § 778.303, Retroactive pay increases (Cornell LII) · Gusto: What is retro pay and how do I calculate it?
Frequently asked questions
What is the difference between retro pay and back pay?
Retro pay corrects an underpayment for work that was paid, but at too low a rate, such as a raise applied late. Back pay is wages that were never paid at all, such as a missed paycheck, unpaid overtime or a wrongful-termination award. The arithmetic is similar but the cause differs.
How is retro pay taxed?
It is ordinary taxable wages subject to income tax, social security and Medicare. If it is paid separately, US employers can withhold federal tax at a flat 22% (37% above $1 million of supplemental wages in a year); if it is lumped into a regular paycheck, normal withholding applies. Withholding is not your final tax; any difference is settled when you file.
Does a retro raise change overtime pay?
Yes. Under 29 CFR 778.303 a retroactive increase raises the regular rate for the whole retro period, so overtime hours are owed the increase times 1.5. A $2 raise means $3 more for every overtime hour worked in those periods.
How do I calculate retro pay for a salaried employee?
Divide the annual salary increase by the number of pay periods in a year and multiply by the periods paid at the old salary. A raise from $52,000 to $55,000 paid every two weeks is $3,000 ÷ 26 = $115.38 per period, so three late periods owe $346.15.
How long does an employer have to pay retro pay?
There is no single federal deadline. Many employers pay it on the next regular payday, union contracts often set a date, and some states have prompt-payment laws with penalties for late wages. Check your contract and state labor department.
Is retro pay included in the regular paycheck or paid separately?
Either. Employers can add it to the next paycheck or run a separate payment. Paying it separately and labeling it on the pay stub makes it easier to check and lets the employer use the 22% flat withholding rate.
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Educational payroll estimate, not tax, payroll or legal advice. Rules and rates vary by jurisdiction and employer — confirm with your payroll department.