Retro pay is a payment made to an employee to compensate them for work that was performed in the past but was not paid at the time. Retro pay is usually granted when an error or mistake has been made in an employee's pay, such as an incorrect salary or an underpayment for overtime hours.

Retro pay may also be given when there is a change in an employee's pay structure or compensation plan, such as a pay increase or a change in the calculation of benefits. In these cases, the retro pay is used to make up for the difference between the previous pay rate and the new pay rate, for a specified period of time.

Retro pay is often a one-time payment, although in some cases it may be paid in installments over a period of time. It is important for employers to ensure that all retro pay is calculated and paid correctly, as failure to do so can result in legal and financial consequences.