How to Calculate Back Pay and Recover Unpaid Wages

To calculate back pay, subtract what you were actually paid from what you should have earned in each pay period, then add those gaps together across every workweek your claim covers. The formula changes depending on whether the underpayment came from a low hourly rate, unpaid overtime, a missed raise, or a bonus that should have raised your overtime rate. Work through the numbers pay period by pay period, because each workweek is treated on its own under the Fair Labor Standards Act.

Gather Your Pay and Time Records First

Every formula below depends on two numbers: hours you actually worked and the rate you should have been paid. Federal regulations require employers to keep payroll records, including hours worked each workday and each workweek, for at least three years.¹ Pull together what you can:

Pay stubs showing your stated hourly rate, commissions, bonuses, and the hours your employer reported.
Time cards, clock-in and clock-out data, or personal logs showing the hours you actually worked.
Offer letters, contracts, or written policies documenting your agreed rate, scheduled raises, and bonus structure.
Emails, texts, or posted schedules that show when you were expected to work, which matters when your employer underreported your hours.

Put everything into a spreadsheet with columns for date, shift start, shift end, unpaid break time, and total hours worked. Then compare each row against the pay stub for that period. The gap between hours worked and hours paid, or between the correct rate and the rate you received, is what you plug into the formulas.

Set the Time Period Your Claim Can Cover

Your claim runs from the first underpayment up to the present or your termination date, but federal law caps how far back you can reach. The FLSA statute of limitations is two years from the date you file. If the violation was willful, meaning your employer knew or showed reckless disregard for whether it was breaking the law, the window extends to three years.²

Each unpaid workweek has its own clock. File on June 1, 2026, and you can recover for underpayments back to June 1, 2024, or June 1, 2023, if the violation was willful. Anything earlier is generally lost, though courts can pause the clock through equitable tolling in narrow situations, such as an employer that actively misled you about your pay. Many states have longer wage-claim deadlines, sometimes four to six years, so a state-law filing may let you reach further back than federal law allows.

Formulas by Type of Underpayment

Gross back pay is the total owed before taxes. Pick the formula that matches how you were shorted.

Hourly Wage Shortfalls

When you were paid less than your correct rate, whether below the federal minimum of $7.25 or below a contracted rate:

(Correct hourly rate − Rate paid) × Total hours worked = Gross back pay

If you should have earned $15 an hour but were paid $13 for 800 hours, the gap is $2 × 800, or $1,600.

Unpaid Overtime

Federal law requires overtime at one and one-half times your regular rate for every hour over 40 in a single workweek.³ If your employer paid nothing for those hours:

Overtime hours × (Regular hourly rate × 1.5) = Gross overtime back pay

An employee earning $20 an hour who worked 10 unpaid overtime hours a week for 20 weeks is owed 200 × $30, or $6,000. If your employer paid straight time and skipped only the premium, you recover the missing half: Overtime hours × (Regular hourly rate × 0.5).

Overtime for Salaried Non-Exempt Workers

Non-exempt salaried employees are entitled to overtime, but the salary has to be converted to an hourly rate first. Divide the annual salary by 2,080 (52 weeks × 40 hours). A $52,000 salary produces a regular rate of $25 an hour, so each unpaid overtime hour is worth $37.50.

Bonuses and Shift Differentials That Raise the Regular Rate

A nondiscretionary bonus, one tied to production targets, attendance, or other predetermined criteria, has to be folded into your regular rate before overtime is calculated.⁴ Employers sometimes calculate overtime on the base rate alone, shortchanging every overtime hour.

Divide the total bonus by the total hours worked during the bonus period to get a bonus hourly rate. Then multiply half of that figure by the overtime hours in the same period. A $1,000 quarterly bonus spread over 520 hours (40 of them overtime) yields a bonus rate of about $1.92 per hour; the extra overtime owed is $0.96 × 40, or $38.40 for the quarter. Shift differentials for night or weekend work follow the same logic: they raise your regular rate, which raises the overtime rate the employer owes.⁵

Missed Raises

If a promised raise was never applied:

(Promised rate − Old rate) × Hours worked since the raise was due = Gross back pay

A $2 raise withheld across 500 hours is $1,000. If the missed raise also depressed your overtime rate, rerun the overtime calculation using the corrected regular rate.

Add Liquidated Damages

Federal law provides for liquidated damages equal to the full amount of unpaid wages, effectively doubling the recovery. If you are owed $5,000 in back pay, you may recover another $5,000 in liquidated damages, for $10,000 total.⁶

Liquidated damages are the default award under the FLSA. A court can reduce or eliminate them only if the employer proves both that it acted in good faith and that it had reasonable grounds for believing its pay practices were lawful.⁷ An employer that ignored overtime rules or misclassified workers without checking the law will struggle to meet that bar. When a court denies liquidated damages, it may award pre-judgment interest to compensate for the delay in payment.

What Taxes Come Out of Back Pay

Back pay is not tax-free. The IRS treats it as supplemental wages, so standard employment taxes apply.⁸ Your employer withholds:

Social Security at 6.2% on wages up to the 2026 wage base of $184,500.⁸
Medicare at 1.45% on all wages, with no cap.
Federal income tax, typically at the 22% flat supplemental rate; supplemental wages above $1 million in a year are withheld at 37%.

Subtract roughly 29.65% from the gross figure for a rough net estimate before any state income tax. The 22% figure is a withholding method, not your final tax. Your actual liability depends on total income for the year, so you may owe more or receive a refund at filing time.

A Note on Filing and Retaliation

Calculating the number is one step; recovering it means either filing a complaint with the Department of Labor’s Wage and Hour Division or bringing a private lawsuit, and you generally cannot pursue both for the same wages.⁹ A private FLSA suit lets you recover back pay, liquidated damages, attorney’s fees, and court costs, which is why many wage-and-hour attorneys take these cases on contingency.⁶

Federal law also makes it illegal for your employer to fire, demote, or otherwise punish you for filing a wage complaint or participating in an investigation, and those protections apply from the moment you raise the issue.¹⁰ Document any changes to your schedule, pay, or duties after you start pursuing a claim; a retaliation case can seek reinstatement, lost wages, and liquidated damages on top of the underlying wage claim.¹¹

1
eCFR. 29 CFR Part 516 – Records to Be Kept by Employers
2
Office of the Law Revision Counsel. 29 U.S. Code 255 – Statute of Limitations
3
Office of the Law Revision Counsel. 29 U.S. Code 207 – Maximum Hours
4
eCFR. 29 CFR 778.209 – Method of Inclusion of Bonus in Regular Rate
5
eCFR. 29 CFR Part 778 – Overtime Compensation
6
Office of the Law Revision Counsel. 29 USC 216 – Penalties
7
Office of the Law Revision Counsel. 29 U.S. Code 260 – Liquidated Damages
8
Internal Revenue Service. Publication 15 (2026), (Circular E), Employers Tax Guide
9
U.S. Department of Labor. Back Pay
10
Office of the Law Revision Counsel. 29 U.S. Code 215 – Prohibited Acts
11
U.S. Department of Labor. Fact Sheet 77A – Prohibiting Retaliation Under the Fair Labor Standards Act