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. You must integrate shift differential pay into any overtime pay worked in the same period. This can be a one-time payment to employees on a specific shift. 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. While the vast majority of employers pay employees overtime at one and a half times their hourly rate, they may make the mistake of treating shift differentials as a separate compensation item. Instead of paying a differential premium, you can offer extra PTO to employees who will consider working at night. Third-shift differentials generally are slightly higher than second-shift differentials, according to the “2010 Culpepper U.S. Just be sure to track overtime so you can easily add the premium rate into your overtime calculation. For example, an employee who works the “graveyard” shift may receive a pay differential of 10%. I would like to determine if the current premiums we pay for shift premiums are competitive in our industry. Premiums calculated as a percentage of hourly … 0000012065 00000 n It’s a good idea to research how your competitors handle it before implementing. Normal business hours are typically around 8:00 a.m. to 5:00 p.m.; however, some employers consider work after 2:00 p.m. to be eligible for shift pay. 0000020382 00000 n 0000005601 00000 n For hourly employees, a shift differential may be a percentage of the employee’s base rate or an extra flat amount per hour. Holiday pay: Holiday pay is generally 1.5 or 2 times normal pay. 0000007957 00000 n Don’t pay weekend premiums. 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. 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. YouTube, 355 Lexington Avenue, 18th Floor Alternatively, some employers will offer a supplemental premium that’s paid out once in the year, similar to a bonus. 0000019813 00000 n 0000001016 00000 n 0000002620 00000 n Sign up to receive more well-researched human resources articles and topics in your inbox, personalized for you. 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. 0000004978 00000 n Employers should have a shift pay policy in place that outlines which hours are eligible for premium 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). (Only if you want to get insider advice and tips). Select the newsletters you’re interested in below. 0000007633 00000 n 0000019743 00000 n 0000003677 00000 n 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. The overtime rate is built into the system during setup, so it’s easy to calculate when necessary. Calculating shift differentials is simple. 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. If you’re planning to implement a shift differential pay plan, consider using Gusto for payroll. 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. Does your organization pay shift differentials and/or any incentives for working 2nd shift, or 3rd shift? Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. I want to stress that every environment is unique. 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. It’s up to you to determine whether offering a shift differential is right for your business. For example, a worker who earns $10 per hour and an additional $0.50 per hour for a weekend shift differential, works three 10-hour shifts on Wednesday, Thursday and … A shift differential, or shift pay, is premium compensation employers pay to employees who work outside of normal business hours. Shift Differential Pay Practices Survey,” published by Culpepper, a Georgia-based compensation consulting firm. 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. However, there is a small percentage of employers who opt to pay salaried employees a premium for shift work. 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 example, if a restaurant is open past midnight, employees working the night shift may receive an extra $2 an hour. 0000001457 00000 n 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. This premium is typically paid as a flat amount per hour or as an additional percentage of the employee’s hourly rate. Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. This article is part of a larger series on How to Do Payroll. 0000007660 00000 n Department Responsibility There are advantages and disadvantages to both, so consider all factors carefully. 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. 0000001273 00000 n New York, NY 10017. 0000008092 00000 n 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. Shift differential Link. Another good alternative to shift pay is a flexible work schedule. Best Practices are not. Either way, once you determine how much the premium is, you pay all hours eligible for shift pay at that rate. If you want to avoid causing resentment among employees on the first shift, offer them a bonus as well, just for a smaller amount. Following are guidelines and some examples to assist hiring managers in making one-time pay decisions. Differentials expressed in cents-per-hour have been I'm looking specifically for 2nd and 3rd shifts and how they are paid (flat amount vs. percentage of base). Charlette Beasley is a writer and editor at Fit Small Business focusing on payroll. It is also vital that a balance between employees having the ability to make as much money from their shift schedule as possible and protection for the company from increased labor costs caused by incorrect policies is achieved.”. 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. Employer practices vary widely on this issue. Any eligible employee who works an evening, night or weekend shift will … 0000012806 00000 n You can decide the hours, days, and the amount of the shift pay you want to offer without justifying it to the Department of Labor. Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. Once again, the split shift is a common arrangement for cleaning contracts. There are numerous ways for you to structure and calculate employee bonuses. 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. We may make money when you click on links to our partners. There is no legal requirement to pay a shift differential, so there is no standardized rate of pay associated with it. If you’re in the small percentage of employers who want to offer shift pay to your salaried personnel, like restaurant kitchen managers, consider offering it as a percentage of their annual base salary or a separate flat supplement. %PDF-1.4 %âãÏÓ Carolyn Denman, Finance Director of The Tolan Group, discusses the challenges and benefits that come along with offering paid time off: “Tracking paid time off (PTO) can cause challenges, especially in our business, as we have salaried employees as well as those on commission. information about trends in compensation programs and practices. The total number of hours in the week is 42.5. Please explain your organization's pay practices and/or incentives for employees working 2nd shift. Shift differential premiums for hourly employees are usually calculated as either a percentage of hourly pay rate or as an additional flat amount. Balancing the multi-faceted demands of employees can make attracting, keeping, and motivating talent complex. Although this may be an honest error, failure to include the differential into the employee’s regular rate will result in improper overtime payment in workweeks where an employee exceeds 40 hours. Instead of explaining to employees what a shift differential is and paying extra money per hour, you can offer an annual bonus. 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… Instead of requiring a time-and-a-half premium after a 40-hour work week, California requires double-time pay for employees who work over 12 in a workday. You’ll simply set a consistent PTO accrual rate and track hours accumulated and used. When employees use paid time off (PTO), they’re usually paid at their regular hourly pay rates. The most frequently offered type of differential pay is given for specific work shifts and is common in the manufacturing industry. 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. A comprehensive Annual Report includes data on base hourly rates, salary range, per diem rates, specialty pay, and weekend and shift differentials. 0000005698 00000 n Pay 10% to 15% shift differential for non-day shifts. Ollie Smith, CEO of Energy Seek, discusses the importance of considering both employer and employee interests when setting a shift pay policy: “It is important to ensure that employees with much higher levels of responsibility, such as managers, qualify for a higher shift differential than other employees working the same shift. 0000016507 00000 n Generally, regular shift pay differential is in increments of 5% for the evening shift (6 PM to 12 AM) and 10% for the night shift (12 AM to 6 AM). Here are the alternatives to offering shift pay: Who doesn’t appreciate extra time off? 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. 0000020752 00000 n If you’re wondering whether you should offer shift pay, consider your industry norm. Special pay practices (non-base) Link. Don’t start earlier than 6:00 am. 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. Receive an extra $ 2 an hour hours will also be paid shift differential, or pay! Take off when needed by always having backup support easy to calculate necessary! 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