Retro Pay Calculator

What is retro pay?

Retroactive pay (retro pay) is the money your employer owes you when a pay increase takes effect later than the date it was supposed to. A common case: your raise is approved effective the start of the month, but payroll doesn't update until two or three pay periods later. For those periods you were paid the old rate, so the difference is owed to you as retro pay. The same idea applies to a corrected hourly rate or a missed shift differential.

How to calculate retro pay

For a salary raise, work out the extra you should have earned each pay period and multiply by the number of periods you were underpaid:

Retro pay = (new salary − old salary) ÷ pay periods per year × periods owed

For an hourly raise, multiply the rate difference by the hours you worked during the retro window:

Retro pay = (new rate − old rate) × hours worked

Retro pay usually flows from a raise, so if you're still figuring out your new salary, start with the pay raise calculator, then come back here for the back pay you're owed.

Is retro pay taxed differently?

Retro pay is ordinary income, but the IRS classifies it as a supplemental wage. That means your employer can withhold federal income tax at a flat 22% rate (for amounts under $1 million) instead of your normal withholding, and Social Security and Medicare (FICA) still come out. The flat rate can make the deduction look steep, but it's just withholding — your true tax is reconciled when you file. To see how taxes hit your regular paycheck, try the take-home pay calculator.

Retro pay calculator FAQ

What is retro pay?

Retroactive pay, or retro pay, is money your employer owes you when a pay increase takes effect later than it should have. If your raise was approved for a past date but you kept getting paid the old rate, the difference for those pay periods is your retro pay.

How does retro pay work?

Once the correct rate is applied, your employer calculates the gap between what you were paid and what you should have been paid for each affected pay period, then pays the total — usually as a separate line item or a one-off addition to a regular paycheck.

How do you calculate retro pay?

For a salary raise, find the extra amount per pay period (new salary minus old salary, divided by the number of pay periods in a year) and multiply by the number of periods you were underpaid. For an hourly raise, multiply the difference between the new and old rate by the hours you worked in the retro window.

Is retro pay taxed differently?

Retro pay is taxed like normal income, but because it's a supplemental wage, employers often withhold federal income tax at a flat 22% rate (for amounts under $1 million) instead of using your regular withholding. FICA still applies. The flat rate can make the withholding look high, but your actual tax is settled when you file.

What's the difference between retro pay and back pay?

Retro pay is the difference owed when a raise or correct rate is applied late. Back pay is wages you were never paid at all — for example after a wrongful termination, an unpaid bonus, or a wage-and-hour dispute. The math for a delayed raise is the same, which is why this tool covers both.