Salaried employees are usually offered shift differentials as a percentage. A number of hardship situations can result in pay differentials (e.g., additional pay for the same job) such as: shift, geographic, hazard, and expatriate pay. A shift differentialis paid to employees that work outside regular hours (Monday through Friday, from 8:00 a.m. to 5:00 p.m. for office work or 7:00 a.m. to 3:00 p.m. for manufacturing/service businesses). Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. 0000013073 00000 n Don’t pay weekend premiums. To receive the shift differential, the employee must work at least one full hour after 5:00 p.m. or … Employees receive shift pay only when they work the eligible hours set by their employer, and the practice is optional. However, you can opt to make holiday work hours eligible for shift pay. The employee's shift was expanded by 1.5 hours each day. Shift Differential. Before you can calculate a shift differential, you must decide whether it will be offered as a percentage of your employees’ hourly rates or a flat amount. Since differential pay is company policy, not something regulated by the government, there’s no standard way to pay it. If you opt for the percentage method, you can pay it out evenly over 12 months, especially if the employees are expected to regularly work outside of normal business hours. It’s best to set up a policy to ensure you and your employees are always on the same page about what a shift differential is and how much shift pay they’re entitled to. Include the following in your shift pay policy: Invest the time you need on the front-end to create a solid shift pay policy. Fit Small Business content and reviews are editorially independent. With more than a decade of accounting and finance experience, Charlette has worked side-by-side with HR and accounting leaders to establish and help implement payroll best practices, controls, and systems. 0000005810 00000 n What works best at one site may not be applicable to another. 0000019979 00000 n When employees use paid time off (PTO), they’re usually paid at their regular hourly pay rates. New York, NY 10017. The Federal Labor Standards Act (FLSA) has strict regulations regarding overtime. She uses this extensive experience to answer your questions about payroll. 0000000016 00000 n Normal work hours are paid at their regular rate; you’ll add regular pay and shift pay together to determine the employee’s total gross pay. The payment of a shift differential is appropriate when overtime-eligible, non-bargaining unit employees, and occasionally, exempt employees by prior agreement and because of their job description, are regularly scheduled to work an evening, night or weekend shift. Some industries, like banking, don’t offer premium shift pay because their hours fall within “normal business hours.” If your business operates late in the afternoon or overnight and you’re having trouble finding staff to work during those hours, you should consider offering an incentive like shift pay. Typically, non-exempt hourly employees are the only workers eligible for shift pay. Additionally, employers may need to factor in different shifts and differential payments when jobs are covered by labor unions, as well as differences in time and length of shift worked. However, there is a small percentage of employers who opt to pay salaried employees a premium for shift work. Shift pay is best for employers that operate outside of the regular 9-to-5 schedule. Topics include eligibility for shift differential pay by type of job & job level, type of shift, payment methods, and shift differential amounts. Consider your state requirements when performing pay calculations that involve shift pay and overtime. Employer practices vary widely on this issue. 4.16 Leave of Absence Without Pay. Calculating Shift Differential Pay. This means you must add the overtime rate into regular hourly rates for all employees who earn shift pay and work over 40 hours a week. You can create different job types to separate your employees’ shift differentials from their regular hourly pay rates. Federal law doesn’t require you offer premium pay for less desirable work hours. Split shifts - A shift that is “split” into two parts so that a worker may for example work the first part of the shift between 6am and 10am, while the latter takes place between 4pm and 8pm. This premium is typically paid as a flat amount per hour or as an additional percentage of the employee’s hourly rate. 0000012806 00000 n A comprehensive Annual Report includes data on base hourly rates, salary range, per diem rates, specialty pay, and weekend and shift differentials. 316 0 obj <> endobj xref Instead of paying a differential premium, you can offer extra PTO to employees who will consider working at night. Employees who work on a continuing shift differential basis should always be paid overtime at 1.5 the base salary plus 1.5 the shift differential rate. Sign up to receive more well-researched human resources articles and topics in your inbox, personalized for you. 0000002705 00000 n There is no legal requirement to pay a shift differential, so there is no standardized rate of pay associated with it. When full time employees work beyond (either before or after) their scheduled shift, they will continue to receive the shift premium, if any, determined by their starting time, or where majority of the hours are worked, except if they work an additional full shift, they will be paid the shift premium for that shift or the shift premium for the first full shift whichever premium is greater. The appropriate shift differential pay amount will be based on several factors including shift hours worked and competitive pay practices at comparable organizations internal and external to the department. Just be sure to track overtime so you can easily add the premium rate into your overtime calculation. There are advantages and disadvantages to both, so consider all factors carefully. Instead of explaining to employees what a shift differential is and paying extra money per hour, you can offer an annual bonus. Balancing the multi-faceted demands of employees can make attracting, keeping, and motivating talent complex. The most frequently offered type of differential pay is given for specific work shifts and is common in the manufacturing industry. If their primary work schedule is outside of normal business hours and their pay rate always includes a shift differential, it’s a good idea to pay their PTO at the same rate. For those cases in which there were percentage differentials, the average was 7.3 percent of day rates for the second shift and 10.0 percent for the third. To ensure compliance with overtime laws, you need to track hours worked consistently. Wage and tax calculations are automatic, and all documentation is stored within the payroll system. Our employer started a new unlimited PTO policy for all full-time employees. The Nonmanagement Compensation and Employee Benefits Survey collects data about more than 160 positions on current non-management hourly pay and practices in the hospital industry. Shift pay has historically been implemented to help employers hire and retain staff for work shifts that aren’t attractive to the majority of employees, and it has worked well. When restaurateurs pay tipped minimum wage rates, they should still base the shift pay rate as a percentage of the $7.25 per hour rate versus anything less than that amount. Shift differentials are usually calculated as a percentage of an employee’s pay rate, for instance 25% of a regular $10-per-hour shift equals an extra $2.50 premium, but some employers add a flat premium across the board, like $3 extra per hour. Free scheduling tools, like When I Work, allow you to enter values for overtime, double-time, and daily overtime according to your state’s regulations, and it populates the data accordingly. 0000009379 00000 n A shift differential can be a percentage of base pay or a flat rate per hour and this additional amount is considered the norm for employees working evening, overni… I would like to determine if the current premiums we pay for shift premiums are competitive in our industry. 0000007660 00000 n 0000011645 00000 n Either way, once you determine how much the premium is, you pay all hours eligible for shift pay at that rate. 0000012065 00000 n Because the shift was normally eligible for shift differential, the extra hours will also be paid shift differential. trailer <<0234210472244E6CAD2FFB6E5DEA5EC0>]/Prev 39264/XRefStm 1273>> startxref 0 %%EOF 351 0 obj <>stream That being said, the differential is usually paid as a percentage of wages. 0000019743 00000 n This amount will be determined jointly by the department and the divisional human resources Office or human resources manager. Sign up to receive more well-researched small business articles and topics in your inbox, personalized for you. If you need a simple way to pay employees their regular wages, shift differentials, or alternative annual bonuses, consider Gusto for a payroll software service. In this article, we take a closer look at common pay practices and reveal two common mistakes that many operations make when it comes to weekend shift differentials. Best Practices are not. Department Responsibility hÞb```a``õc`e`´gàg@ ~ +P–ãCó)†½P ‹¤“Š®{õ¬YŸþ+¿ŸÁÀÀ((¨¤Þ @¦Zˆ ҉ ˜AšWn_s€øíö;±L!L¢.²Ë䈼èe]¢cXŦéð!ý_¤Ó×ÖZ. Here are the industries that offer shift pay: Any company can choose to pay employees a premium in an effort to resolve staffing issues during second (around 4 p.m. to midnight) or third (from midnight to 8 a.m.) shifts. 0000007633 00000 n A shift differential, or shift pay, is premium compensation employers pay to employees who work outside of normal business hours. Charlette Beasley is a writer and editor at Fit Small Business focusing on payroll. Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. On May 18, 2016, survey invitations were sent electronically to 5 ,404 WorldatWork members . In this post, I’ve listed 50 of those practices. Some reasons for differential pay practices may include shift work, call-back work, weekend work and hazardous or dirty duty. For example, if a restaurant is open past midnight, employees working the night shift may receive an extra $2 an hour. Most businesses will outline how shift differentials work, if they’re offered, in the employee handbook.Usually, however, differential 0000006353 00000 n Student and temporary employees are eligible for the shift differential when they work 40 or more hours biweekly. Instead, one may find a broad array of practices employed by businesses. 0000001615 00000 n No, federal law doesn’t require shift differential pay. If you want to avoid causing resentment among employees on the first shift, offer them a bonus as well, just for a smaller amount. When paying shift differentials, employee scheduling is very important. Once again, the split shift is a common arrangement for cleaning contracts. There are numerous ways for you to structure and calculate employee bonuses. This can be a one-time payment to employees on a specific shift. 0000020382 00000 n This is a great benefit for young moms like me and it also takes out the guesswork when doing payroll.”, – Carolyn Denman, Director of Finance, The Tolan Group. While evening and night shifts tend to get most of the attention in the shift differential conversation, it’s important to not overlook weekend differentials as well. Keep in mind that overtime rates are generally paid at 1.5 times (or time and a half) the “regular base pay rate.” So, if you have an employee who works 50 hours in the week, with five of those being eligible for shift pay, you’ll need to combine the employee’s regular and shift pay rates to form a new base rate before determining your overtime rate. 0000008092 00000 n Shift differential Link. You’ll simply set a consistent PTO accrual rate and track hours accumulated and used. You must be logged in to comment. Select the newsletters you’re interested in below. 0000004978 00000 n For example, an employee who works the “graveyard” shift may receive a pay differential of 10%. Avoid rotating shifts. Price: FREE to participants. The following are highlights from the 2010 Culpepper U.S. These could be any hours after 5 p.m., on the weekend, or even during holidays. YouTube, 355 Lexington Avenue, 18th Floor Human Resources > Payroll | Ultimate Guide. Though differential pay is a popular practice, private businesses are not required to offer this incentive for holiday, weekend or night work. We make it easy for you to quickly access current market data for individual jobs or request custom data sets for multiple jobs that can be imported into your HRIS or market pricing system. It only regulates minimum wage and overtime pay that is affected by paying shift differentials. %PDF-1.4 %âãÏÓ LinkedIn Federal law requires all employees be paid at least the minimum wage, currently $7.25 an hour, but only $2.13 per hour has to be paid by the employer. Holiday pay: Holiday pay is generally 1.5 or 2 times normal pay. Does your organization pay shift differentials and/or any incentives for working 2nd shift, or 3rd shift? For hourly employees, a shift differential may be a percentage of the employee’s base rate or an extra flat amount per hour. You can pay hourly, salary, or flat rates, and payroll can be automated. The new, standard shift differential will be a flat rate, which means no matter what your base pay rate is or at which member organization you work, your time is equally valued. Employers should have a shift pay policy in place that outlines which hours are eligible for premium pay. You must integrate shift differential pay into any overtime pay worked in the same period. Morning shift - A shift … 0000001016 00000 n First-shift hours are considered to be “normal,” commonly 7 a.m. to 3 p.m., and are paid at a … 0000004207 00000 n 0000003156 00000 n 0000016507 00000 n Some employers will allow workers to determine the days they want to work each week. *T+50% applies to pay point 12 or above, T+100% to pay point 11 or below ** Rates listed are for former APT&C staff Source: IDS, Seven Day Working Practices and Payments, March 2015 and UNISON Bargaining Agreements Database Sure to track overtime so you can opt to make holiday work hours eligible for the shift was by... 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