For example, if a restaurant is open past midnight, employees working the night shift may receive an extra $2 an hour. 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. Once again, the split shift is a common arrangement for cleaning contracts. 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 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. To receive the shift differential, the employee must work at least one full hour after 5:00 p.m. or … That being said, the differential is usually paid as a percentage of wages. Shift differential premiums for hourly employees are usually calculated as either a percentage of hourly pay rate or as an additional flat amount. Our employer started a new unlimited PTO policy for all full-time employees. A comprehensive Annual Report includes data on base hourly rates, salary range, per diem rates, specialty pay, and weekend and shift differentials. 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. Price: FREE to participants. However, you can opt to make holiday work hours eligible for shift pay. Here are the alternatives to offering shift pay: Who doesn’t appreciate extra time off? First-shift hours are considered to be “normal,” commonly 7 a.m. to 3 p.m., and are paid at a … information about trends in compensation programs and practices. • … 0000009379 00000 n Holiday pay: Holiday pay is generally 1.5 or 2 times normal pay. This can be as lenient as you want. 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. A shift differential, or shift pay, is a premium employers pay to employees who work outside of normal business hours. Human Resources > Payroll | Ultimate Guide. 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. 0000006353 00000 n 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. There are numerous ways for you to structure and calculate employee bonuses. Any eligible employee who works an evening, night or weekend shift will … 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 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. I would like to determine if the current premiums we pay for shift premiums are competitive in our industry. Try to keep it down to a maximum of one full page, so employees can easily digest the information. 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. To ensure compliance with overtime laws, you need to track hours worked consistently. 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. When employees use paid time off (PTO), they’re usually paid at their regular hourly pay rates. Instead of paying a differential premium, you can offer extra PTO to employees who will consider working at night. 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. 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. This article is part of a larger series on How to Do Payroll. 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. In this post, I’ve listed 50 of those practices. You also need to be aware that some states, for example, California, have their own overtime laws. For example, an employee who works the “graveyard” shift may receive a pay differential of 10%. 0000007633 00000 n Select the newsletters you’re interested in below. 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. Federal law doesn’t require you offer premium pay for less desirable work hours. Legally, employers must include this premium in any overtime calculations, or they’ll face penalties. 0000013073 00000 n 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. We may make money when you click on links to our partners. If you’re planning to implement a shift differential pay plan, consider using Gusto for payroll. 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. Best Practices are not. Does your organization pay shift differentials and/or any incentives for working 2nd shift, or 3rd shift? These could be any hours after 5 p.m., on the weekend, or even during holidays. When employees use paid vacation or sick time, they’re usually compensated at their regular hourly pay rates. 0000012065 00000 n 0000006858 00000 n 0000002620 00000 n Labor and Employee Relations 124 Mt. 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. 0000020752 00000 n 0000003677 00000 n You can offer other incentives aside from shift pay to encourage more interest in your open positions. You can pay hourly, salary, or flat rates, and payroll can be automated. You must integrate shift differential pay into any overtime pay worked in the same period. Pay 10% to 15% shift differential for non-day shifts. Don’t start earlier than 6:00 am. Special pay practices (non-base) Link. 0000005810 00000 n Auburn Street Suite 480 Cambridge, MA 02138 Phone: 617-495-2786 Email: [email protected] 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 … Shift differential Link. 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. Calculating Shift Differential Pay. 0000010128 00000 n Others make it easy for them to take off when needed by always having backup support. Some employers will allow workers to determine the days they want to work each week. If you want to avoid causing resentment among employees on the first shift, offer them a bonus as well, just for a smaller amount. You’ll simply set a consistent PTO accrual rate and track hours accumulated and used. 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. 0000007957 00000 n It only regulates minimum wage and overtime pay that is affected by paying shift differentials. 0000001615 00000 n (Only if you want to get insider advice and tips). 0000016507 00000 n It’s up to you to determine whether offering a shift differential is right for your business. 0000019743 00000 n Instead of explaining to employees what a shift differential is and paying extra money per hour, you can offer an annual bonus. *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 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.”. 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. What works best at one site may not be applicable to another. I'm looking specifically for 2nd and 3rd shifts and how they are paid (flat amount vs. percentage of base). 0000003156 00000 n 0000016423 00000 n The overtime rate is built into the system during setup, so it’s easy to calculate when necessary. 0000003563 00000 n Employees receive shift pay only when they work the eligible hours set by their employer, and the practice is optional. New York, NY 10017. Shift pay is best for employers that operate outside of the regular 9-to-5 schedule. You can create different job types to separate your employees’ shift differentials from their regular hourly pay rates. 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. Premiums calculated as a percentage of hourly … I want to stress that every environment is unique. For example, if a restaurant is open past midnight, employees working the night shift may receive an extra $2 an hour. 0000019979 00000 n Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. If the shift is split exactly equal, you’ll be paid the higher pay rate of the two shifts for the entire shift. Her experience ranges among small, mid-sized, and large businesses in industries like banking and marketing to manufacturing and nonprofit. 0000004978 00000 n There is no legal requirement to pay a shift differential, so there is no standardized rate of pay associated with it. 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. Offering differential pay could give your company an edge on hiring, as long as it makes sense in terms of your business operating hours. 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 can be a one-time payment to employees on a specific shift. 0000005601 00000 n %PDF-1.4 %âãÏÓ YouTube, 355 Lexington Avenue, 18th Floor There are advantages and disadvantages to both, so consider all factors carefully. 0000001457 00000 n 0000020382 00000 n Twitter 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. Click a "Log in" button below to connect instantly and comment. 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 Leave of Absence Without Pay. 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. Please explain your organization's pay practices and/or incentives for employees working 2nd shift. 0000001273 00000 n You can pay a flat premium rate or a percentage of an hourly wage rate to employees who work odd shifts. Employer practices vary widely on this issue. No, federal law doesn’t require shift differential pay. Here are some common questions that employers ask about using shift pay. Sign up to receive more well-researched human resources articles and topics in your inbox, personalized for you. Because the shift was normally eligible for shift differential, the extra hours will also be paid shift differential. 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. Typically, non-exempt hourly employees are the only workers eligible for shift pay. 0000005698 00000 n Topics include eligibility for shift differential pay by type of job & job level, type of shift, payment methods, and shift differential amounts. On May 18, 2016, survey invitations were sent electronically to 5 ,404 WorldatWork members . Employers should have a shift pay policy in place that outlines which hours are eligible for premium pay. 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. Wage and tax calculations are automatic, and all documentation is stored within the payroll system. Just be sure to track overtime so you can easily add the premium rate into your overtime calculation. 0000010862 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. Differentials expressed in cents-per-hour have been 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). 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