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. Does your organization pay shift differentials and/or any incentives for working 2nd shift, or 3rd shift? Shift Differential Pay Practices Survey,” published by Culpepper, a Georgia-based compensation consulting firm. 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 can offer other incentives aside from shift pay to encourage more interest in your open positions. 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. 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. 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. Calculating shift differentials is simple. The Federal Labor Standards Act (FLSA) has strict regulations regarding overtime. (Only if you want to get insider advice and tips). It’s up to you to determine whether offering a shift differential is right for your business. 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. Sign up for a free 30-day trial today. 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. Sign up to receive more well-researched human resources articles and topics in your inbox, personalized for you. 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. 0000002620 00000 n Instead of explaining to employees what a shift differential is and paying extra money per hour, you can offer an annual bonus. 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. For example, if a restaurant is open past midnight, employees working the night shift may receive an extra $2 an hour. 0000020382 00000 n Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. Either way, once you determine how much the premium is, you pay all hours eligible for shift pay at that rate. 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. Third-shift differentials generally are slightly higher than second-shift differentials, according to the “2010 Culpepper U.S. 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. 0000010862 00000 n Shift differential premiums for hourly employees are usually calculated as either a percentage of hourly pay rate or as an additional flat amount. There is no legal requirement to pay a shift differential, so there is no standardized rate of pay associated with it. 0000012065 00000 n Alternatively, some employers will offer a supplemental premium that’s paid out once in the year, similar to a bonus. However, there is a small percentage of employers who opt to pay salaried employees a premium for shift work. 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. 0000019743 00000 n It’s a good idea to research how your competitors handle it before implementing. To ensure compliance with overtime laws, you need to track hours worked consistently. Instead of paying a differential premium, you can offer extra PTO to employees who will consider working at night. It only regulates minimum wage and overtime pay that is affected by paying shift differentials. 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… Though differential pay is a popular practice, private businesses are not required to offer this incentive for holiday, weekend or night work. 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). Can anyone point me to a survey or data that provides current Shift Differential market rates (2011/2012). 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. Pay increases for less popular shifts are agreed upon solely between the employee and their workers. 0000002705 00000 n Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. What works best at one site may not be applicable to another. Balancing the multi-faceted demands of employees can make attracting, keeping, and motivating talent complex. No, federal law doesn’t require shift differential pay. 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. Pay 10% to 15% shift differential for non-day shifts. Employees receive shift pay only when they work the eligible hours set by their employer, and the practice is optional. Sign up to receive more well-researched small business articles and topics in your inbox, personalized for you. I would like to determine if the current premiums we pay for shift premiums are competitive in our industry. Wage and tax calculations are automatic, and all documentation is stored within the payroll system. To receive the shift differential, the employee must work at least one full hour after 5:00 p.m. or … Labor and Employee Relations 124 Mt. Shift Differential Pay Practices Survey of 202 U.S. organizations, fielded July 16-Sept. 17, 2010: • Shift differentials are more common in manufacturing and customer support jobs than in other types of jobs. However, you can opt to make holiday work hours eligible for shift pay. 0000003156 00000 n trailer <<0234210472244E6CAD2FFB6E5DEA5EC0>]/Prev 39264/XRefStm 1273>> startxref 0 %%EOF 351 0 obj <>stream 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. You can also calculate an hourly rate based on the employees’ salaries and the total average full-time hours worked in the year; once you determine an hourly rate, you find the differential pay rate using the same method recommended for hourly workers. Try to keep it down to a maximum of one full page, so employees can easily digest the information. 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 hourly, salary, or flat rates, and payroll can be automated. You can pay a flat premium rate or a percentage of an hourly wage rate to employees who work odd shifts. 0000000016 00000 n You must be logged in to comment. Federal law does, however, require overtime pay for those that work more than 40 hours in a week. Others make it easy for them to take off when needed by always having backup support. A shift differential, or shift pay, is a premium employers pay to employees who work outside of normal business hours. That being said, the differential is usually paid as a percentage of wages. Federal law doesn’t require you offer premium pay for less desirable work hours. 0000011645 00000 n 0000010128 00000 n 0000005810 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. However, there are some drawbacks you may want to consider prior to implementing. Similar ranges for third shifts were 15 to 25 cents per hour and 5 to 10 percent. 0000001457 00000 n 0000019813 00000 n Include the following in your shift pay policy: Invest the time you need on the front-end to create a solid shift pay policy. 4.16 Leave of Absence Without Pay. 0000001615 00000 n Shift pay is best for employers that operate outside of the regular 9-to-5 schedule. 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. Calculating Shift Differential Pay. 0000009379 00000 n If the shift is split exactly equal, you’ll be paid the higher pay rate of the two shifts for the entire shift. Because the shift was normally eligible for shift differential, the extra hours will also be paid shift differential. FREE Guide: How To Run Payroll For Your Small Business! 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.”. Employee's position must be eligible to receive shift pay differential for an employee to receive the pay. 5 p.m., on the weekend, or shift pay policy WorldatWork members whether offering a shift differential pay a! 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