Most businesses will outline how shift differentials work, if they’re offered, in the employee handbook.Usually, however, differential When employees use paid time off (PTO), they’re usually paid at their regular hourly pay rates. Don’t start earlier than 6:00 am. 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. 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. Employer practices vary widely on this issue. The Federal Labor Standards Act (FLSA) has strict regulations regarding overtime. The total number of hours in the week is 42.5. 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. Federal law does, however, require overtime pay for those that work more than 40 hours in a week. 0000010128 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. 0000020382 00000 n Price: FREE to participants. There is no legal requirement to pay a shift differential, so there is no standardized rate of pay associated with it. 0000004978 00000 n What works best at one site may not be applicable to another. Sign up to receive more well-researched small business articles and topics in your inbox, personalized for you. 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). You can pay hourly, salary, or flat rates, and payroll can be automated. There are numerous ways for you to structure and calculate employee bonuses. You must integrate shift differential pay into any overtime pay worked in the same period. Don’t pay weekend premiums. 0000019813 00000 n When you work a shift that spans across two shift zones, your pay rate and any applicable shift differential will be based on the shift in which you worked the majority of your hours. However, there are some drawbacks you may want to consider prior to implementing. 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. The shift differential rate is added to the normal hourly pay rate and must be applied to all Hours Worked on the shift (i.e., overtime, holiday, vacation, and sick leave pay). With this alternative, you won’t have to perform any complex shift pay and overtime calculations. If the shift is split exactly equal, you’ll be paid the higher pay rate of the two shifts for the entire shift. That being said, the differential is usually paid as a percentage of wages. Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. 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. If you’re planning to implement a shift differential pay plan, consider using Gusto for payroll. 0000001615 00000 n 0000005810 00000 n 0000001457 00000 n 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. 0000002620 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. 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. Holiday pay: Holiday pay is generally 1.5 or 2 times normal pay. 0000020752 00000 n Our employer started a new unlimited PTO policy for all full-time employees. (Only if you want to get insider advice and tips). You must be logged in to comment. The last 2.5 hours are eligible for overtime. Once again, the split shift is a common arrangement for cleaning contracts. Following are guidelines and some examples to assist hiring managers in making one-time pay decisions. 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. information about trends in compensation programs and practices. 0000007957 00000 n New York, NY 10017. Employers should have a shift pay policy in place that outlines which hours are eligible for premium pay. This survey focuses on the prevalence of base and variable pay programs as well as common practices used to administer and communicate these programs in today’s workplace. 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. 0000010862 00000 n A comprehensive Annual Report includes data on base hourly rates, salary range, per diem rates, specialty pay, and weekend and shift differentials. Topics include eligibility for shift differential pay by type of job & job level, type of shift, payment methods, and shift differential amounts. 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. This amount will be determined jointly by the department and the divisional human resources Office or human resources manager. Some employers will allow workers to determine the days they want to work each week. It’s important that you understand the pros and cons of shift pay before developing a company policy. 0000009379 00000 n Typically, non-exempt hourly employees are the only workers eligible for shift pay. Be clear, succinct, and consistent. 0000007660 00000 n Consider your state requirements when performing pay calculations that involve shift pay and overtime. When paying shift differentials, employee scheduling is very important. Another good alternative to shift pay is a flexible work schedule. Offering differential pay could give your company an edge on hiring, as long as it makes sense in terms of your business operating hours. 0000000016 00000 n Since differential pay is company policy, not something regulated by the government, there’s no standard way to pay it. 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. 316 0 obj <> endobj xref For example, an employee who works the “graveyard” shift may receive a pay differential of 10%. 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. However, there is a small percentage of employers who opt to pay salaried employees a premium for shift work. 0000003156 00000 n Auburn Street Suite 480 Cambridge, MA 02138 Phone: 617-495-2786 Email: labor_and_employee_relations@harvard.edu Human Resources > Payroll | Ultimate Guide. trailer <<0234210472244E6CAD2FFB6E5DEA5EC0>]/Prev 39264/XRefStm 1273>> startxref 0 %%EOF 351 0 obj <>stream To receive the shift differential, the employee must work at least one full hour after 5:00 p.m. or … No, federal law doesn’t require shift differential pay. 316 36 Here are the alternatives to offering shift pay: Who doesn’t appreciate extra time off? 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… Calculating Shift Differential Pay. 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. 4.16.1 Approval of Voluntary Leave Without Pay; 4.16.2 Request for Voluntary Leave Without Pay; 4.16.3 Furlough; 4.16.4 Continuation of Benefits During Leave Without Pay; 4.16.5 Vacation Accrual While On Leave Without Pay; 4.16.6 Adjustment of Sick Leave Following Leave Without Pay 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. 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. Because the shift was normally eligible for shift differential, the extra hours will also be paid shift differential. 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. You can offer other incentives aside from shift pay to encourage more interest in your open positions. Any eligible employee who works an evening, night or weekend shift will … 0000012806 00000 n Shift differential Link. Twitter 0000006353 00000 n Student and temporary employees are eligible for the shift differential when they work 40 or more hours biweekly. Pay 10% to 15% shift differential for non-day shifts. Sign up for a free 30-day trial today. 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. 0000006858 00000 n In this post, I’ve listed 50 of those practices. Instead, one may find a broad array of practices employed by businesses. I would like to determine if the current premiums we pay for shift premiums are competitive in our industry. Best Practices are not. These could be any hours after 5 p.m., on the weekend, or even during holidays. Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. Special pay practices (non-base) Link. 0000007633 00000 n 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. Facebook Can anyone point me to a survey or data that provides current Shift Differential market rates (2011/2012). Premiums calculated as a percentage of hourly … Culpepper Compensation Reports provide powerful and easy-to-use online tools for viewing and analyzing compensation data. 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. Calculating shift differentials is simple. Similar ranges for third shifts were 15 to 25 cents per hour and 5 to 10 percent. If the cons of offering shift pay outweighs the pros for your business but you still need a way to improve hiring for your second or third work shift, you should consider an alternative. There are advantages and disadvantages to both, so consider all factors carefully. 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.”. 0000019979 00000 n If an employer calculates shift pay as a percentage of an employee’s hourly wage rate, paying a tipped employee could lead to higher shift pay rates. Now more than ever it’s important to look at your organization from a high level to determine overall shifts taking place in the workplace and to see how your compensation policies compare to your immediate competitors beyond base pay. Balancing the multi-faceted demands of employees can make attracting, keeping, and motivating talent complex. 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. However, you can opt to make holiday work hours eligible for shift pay. When employees use paid vacation or sick time, they’re usually compensated at their regular hourly pay rates. FREE Guide: How To Run Payroll For Your Small Business! Instead of explaining to employees what a shift differential is and paying extra money per hour, you can offer an annual bonus. Wage and tax calculations are automatic, and all documentation is stored within the payroll system. If you’re wondering whether you should offer shift pay, consider your industry norm. For example, if a restaurant is open past midnight, employees working the night shift may receive an extra $2 an hour. 0000013073 00000 n Alternatively, some employers will offer a supplemental premium that’s paid out once in the year, similar to a bonus. Labor and Employee Relations 124 Mt. It’s up to you to determine whether offering a shift differential is right for your business. 0000011645 00000 n 0000012065 00000 n For second shifts, cents-per-hour differentials commonly averaged between 10 and 20 cents; percentage premiums, usually between 5 and 10 percent. 0000016507 00000 n The most frequently offered type of differential pay is given for specific work shifts and is common in the manufacturing industry. To ensure compliance with overtime laws, you need to track hours worked consistently. Third-shift differentials generally are slightly higher than second-shift differentials, according to the “2010 Culpepper U.S. Please explain your organization's pay practices and/or incentives for employees working 2nd shift. Select the newsletters you’re interested in below. This article is part of a larger series on How to Do Payroll. Shift Differential Pay Practices Survey,” published by Culpepper, a Georgia-based compensation consulting firm. Avoid rotating shifts. *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 This premium is typically paid as a flat amount per hour or as an additional percentage of the employee’s hourly rate. 0000003677 00000 n 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. 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. Click a "Log in" button below to connect instantly and comment. 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. 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. You can pay a flat premium rate or a percentage of an hourly wage rate to employees who work odd shifts. 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. 0000002705 00000 n LinkedIn 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. Though differential pay is a popular practice, private businesses are not required to offer this incentive for holiday, weekend or night work. Here are some common questions that employers ask about using shift pay. 0000005698 00000 n You also need to be aware that some states, for example, California, have their own overtime laws. The following are highlights from the 2010 Culpepper U.S. 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. There is no addition to base pay and payments are discontinued once the special circumstance no longer exists. Sign up to receive more well-researched human resources articles and topics in your inbox, personalized for you. 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. Shift differential premiums for hourly employees are usually calculated as either a percentage of hourly pay rate or as an additional flat amount. Just be sure to track overtime so you can easily add the premium rate into your overtime calculation. 0000008788 00000 n Either way, once you determine how much the premium is, you pay all hours eligible for shift pay at that rate. Shift differential that is based on a percentage of an employee’s base pay means that employees are being compensated differently for working the same shift. Employee's position must be eligible to receive shift pay differential for an employee to receive the pay. Federal law doesn’t require you offer premium pay for less desirable work hours. 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. 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. If you want to avoid causing resentment among employees on the first shift, offer them a bonus as well, just for a smaller amount. 0000004207 00000 n Although you can make changes later, it’s much easier to achieve buy-in from new employees when the policy is set in the beginning; people are reluctant to change. 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. Salaried employees are usually offered shift differentials as a percentage. Shift pay is best for employers that operate outside of the regular 9-to-5 schedule. 0000008092 00000 n I want to stress that every environment is unique. Pay increases for less popular shifts are agreed upon solely between the employee and their workers. The overtime rate is built into the system during setup, so it’s easy to calculate when necessary. It’s a good idea to research how your competitors handle it before implementing. Department Responsibility Employees receive shift pay only when they work the eligible hours set by their employer, and the practice is optional. 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. Others make it easy for them to take off when needed by always having backup support. 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Resources articles and topics in your inbox, personalized for you sent electronically to 5 WorldatWork! Re wondering whether you should offer shift pay this article is part of a larger series on to... Office or human resources Office or human resources manager at their regular hourly pay rates pay rate or a.. Are editorially independent premiums we pay for shift pay and overtime calculations years of experience in accounting and and... Can pay hourly, salary, or shift pay policy you also need to aware. Payroll can be automated were sent electronically to 5,404 WorldatWork members button! More interest in your open positions on may 18, 2016, Survey invitations sent. This amount will be determined jointly by the government, there are some drawbacks may! And tax calculations are automatic, and the divisional human resources articles topics! Viewing and analyzing compensation data interest in your shift pay: who doesn ’ t extra! 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