Wage and tax calculations are automatic, and all documentation is stored within the payroll system. Typically, non-exempt hourly employees are the only workers eligible for shift pay. In this post, I’ve listed 50 of those practices. 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. Calculating Shift Differential Pay. Just be sure to track overtime so you can easily add the premium rate into your overtime calculation. 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 Try to keep it down to a maximum of one full page, so employees can easily digest the information. This amount will be determined jointly by the department and the divisional human resources Office or human resources manager. 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. Following are guidelines and some examples to assist hiring managers in making one-time pay decisions. 0000005698 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… A shift differential, or shift pay, is a premium employers pay to employees who work outside of normal business hours. 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 up to you to determine whether offering a shift differential is right for your business. No, federal law doesn’t require shift differential pay. Employees receive shift pay only when they work the eligible hours set by their employer, and the practice is optional. This premium is typically paid as a flat amount per hour or as an additional percentage of the employee’s hourly rate. 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. I would like to determine if the current premiums we pay for shift premiums are competitive in our industry. She uses this extensive experience to answer your questions about payroll. The overtime rate is built into the system during setup, so it’s easy to calculate when necessary. The following are highlights from the 2010 Culpepper U.S. You must integrate shift differential pay into any overtime pay worked in the same period. A comprehensive Annual Report includes data on base hourly rates, salary range, per diem rates, specialty pay, and weekend and shift differentials. Her experience ranges among small, mid-sized, and large businesses in industries like banking and marketing to manufacturing and nonprofit. 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. There is no legal requirement to pay a shift differential, so there is no standardized rate of pay associated with it. For example, an employee who works the “graveyard” shift may receive a pay differential of 10%. You can pay a flat premium rate or a percentage of an hourly wage rate to employees who work odd shifts. Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. Shift Differential. It’s important that you understand the pros and cons of shift pay before developing a company policy. 0000011645 00000 n 0000006858 00000 n Auburn Street Suite 480 Cambridge, MA 02138 Phone: 617-495-2786 Email: labor_and_employee_relations@harvard.edu Instead, one may find a broad array of practices employed by businesses. A shift differential, or shift pay, is premium compensation employers pay to employees who work outside of normal business hours. Once again, the split shift is a common arrangement for cleaning contracts. There are numerous ways for you to structure and calculate employee bonuses. However, there are some drawbacks you may want to consider prior to implementing. 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. 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. Offering differential pay could give your company an edge on hiring, as long as it makes sense in terms of your business operating hours. To ensure compliance with overtime laws, you need to track hours worked consistently. You can offer other incentives aside from shift pay to encourage more interest in your open positions. Calculating shift differentials is simple. 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. 0000010862 00000 n That being said, the differential is usually paid as a percentage of wages. 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. When employees use paid time off (PTO), they’re usually paid at their regular hourly pay rates. 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. Click a "Log in" button below to connect instantly and comment. *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 Shift Differential Pay Practices Survey,” published by Culpepper, a Georgia-based compensation consulting firm. Similar ranges for third shifts were 15 to 25 cents per hour and 5 to 10 percent. 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. Department Responsibility 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. 0000013073 00000 n Can anyone point me to a survey or data that provides current Shift Differential market rates (2011/2012). Select the newsletters you’re interested in below. Human Resources > Payroll | Ultimate Guide. There are advantages and disadvantages to both, so consider all factors carefully. Start your 30-day free trial today. Be clear, succinct, and consistent. 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. Fit Small Business content and reviews are editorially independent. Premiums calculated as a percentage of hourly … This can be a one-time payment to employees on a specific shift. Topics include eligibility for shift differential pay by type of job & job level, type of shift, payment methods, and shift differential amounts. Does your organization pay shift differentials and/or any incentives for working 2nd shift, or 3rd shift? If the shift is split exactly equal, you’ll be paid the higher pay rate of the two shifts for the entire shift. For example, if a restaurant is open past midnight, employees working the night shift may receive an extra $2 an hour. 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. 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