The employee worked 45 hours, 30 of which were during evening shifts, in a week. Learn how SHRM Certification can accelerate your career growth by earning a SHRM-CP or SHRM-SCP. However, an employee who performs two or more different kinds of work, for which different straight time hourly rates are established, may agree with his or her employer in advance of the performance of the work that he or she will be paid during overtime hours at a rate not less than one and one-half time the hourly rate established for the type of work he or she is performing during the overtime hours. .dol-alert-status-error .alert-status-container {display:inline;font-size:1.4em;color:#e31c3d;} A guard whose basic rate is $25 per hour has a premium rate of $30 per hour. Shift Differentials: Compensation for Working Undesirable Hours Organizations with 24/7/365 operations face the challenge of recruiting and staffing employees to work beyond standard day. Culpepper and Associates conducts worldwide salary surveys and provides benchmark data for compensation and employee benefit programs. Your financial situation is unique and the products and services we review may not be right for your circumstances. She is paid on a 40-hour workweek overtime basis. An event of absence is a continuous period of absence. A shift differential is a powerful tool that can help employers fill shifts that most people dont ideally want to work. Build specialized knowledge and expand your influence by earning a SHRM Specialty Credential. For example, a company increases the pay of anyone working on its graveyard shift by 10%, or an emergency care clinic pays its doctors an extra $300 to work the second shift. Culpepper and Associates Inc., which conducts worldwide salary surveys and provides benchmark data for compensation and employee benefit programs. Best Homeowners Insurance for New Construction, How to Get Discounts on Homeowners Insurance. Eligibility for Differential Pay Shift differential is paid for full 8, 10, or 12 hour shifts scheduled to begin between 11:00 a.m. and 9:00 a.m. the following day, provided the majority of straight time hours are worked between 3:00 p.m. and 7:00 a.m. Shift differential premiums vary depending on a number of factors, including: More than just timecards or a timesheet solution, PayClock is a comprehensive web-based software and time clock system that lets you manage all of your workforce employee time data with detailed reporting delivering faster payroll processing. The following is an example of how to compute overtime pay based on the employees regular rate: $10.00 per hour x 43 hours = $430.00 (total compensation for straight time), $430.00 + $50.00 (excludes $25.00 discretionary bonus) = $480.00 (total compensation), $480.00 + $16.74 +$25.00 (discretionary bonus) = $521.74 (total due). Chriss gross pay for the night shift is: Shift differentials and overtime together can significantly increase your payroll costs. Bonuses based on a predetermined formula, such as individual or group production bonuses; Bonuses for quality and accuracy of work; Bonuses announced to employees to induce them to work more efficiently; Safety bonuses (i.e., number of days without safety incidents). .h1 {font-family:'Merriweather';font-weight:700;} Organizations with continuous, 24/7/365 operations face the challenge of recruiting and sta ffing employees to work beyond standard day shifts. For any workweek in which the employee worked overtime, you . The ability to be paid more can give workers the peace of mind that they can afford to move to an area with a higher cost of living for the position. The assistant earned a total of $408 for the 48 hours that she worked ($8 an hour times 24 hours plus $9 an hour times 24 hours). A common error in calculating overtime pay by health care employers involve the failure to include bonuses, shift differentials and other types of compensation in the regular rate of pay. Melanies gross pay before overtime is $230 ($180 cooking + $50 cleaning). Under the 8 and 80 overtime system, they are entitled to overtime for each hour worked over 8 in a day. Pay Differentials are typically initiated through the collective bargaining process but may also be the result of a classification proposal. Many employers think you calculate FLSA overtime based on an employees basic hourly rate, but thats incorrect and illegal. Shift differentials are common in the healthcare industry. Guards work in three shifts: 7 a.m. to 3 p.m., 3 p.m. to 11 p.m., and 11 p.m. to 7 a.m. security nurse shall receive a $1.50 an hour shift differential. The additional half-time must be computed based on the regular rate of pay. 2010 Culpepper U.S. job function, level of responsibility, influence of labor unions on specific jobs, location and type of shift. Shift differentials come in three forms: a percentage of basic hourly pay, a dollar amount per hour, or a dollar amount per shift. xw\LzHh j %P *! Kimberlee Leonard has taken her professional experience as an insurance agency owner and financial advisor and translated that into a finance writing career that helps business owners and professionals succeed. Melanie has already worked 40 hours this week, and shes about to work an eight-hour night shift. For purposes of calculating overtime pay, section 7(e) of the FLSA provides that non-discretionary bonuses must be included in the regular rate of pay. Federal government websites often end in .gov or .mil. Need help with a specific HR issue like coronavirus or FLSA? Most companies pay shift differentials to hourly employees working, second shift (swing shift), third-shift (graveyard shift), Approximately one-third of companies pay shift differentials to salaried employees working. Find the latest news and members-only resources that can help employers navigate in an uncertain economy. The employee worked 45 hours, 30 of which were during evening shifts, in a week. During this time, they receive a regular rate for their hours worked. The labor shortage is still affecting thousands of organizations across the country. No. For example, if the employee worked 40 hours at $11 and 16 hours at $8, the following is the regular rate calculation: 40 hours x $11/hour + 16 hours x $8/hour =, $568 (total straight time compensation) 56 hours worked =, $15.21 (overtime rate) x 16 (overtime hours). Members may download one copy of our sample forms and templates for your personal use within your organization. Shift differential is additional compensation intended to recognize time worked outside of day shifts. Shift differentials are more common in manufacturing and customer support jobs than other types of jobs. @media (max-width: 992px){.usa-js-mobile-nav--active, .usa-mobile_nav-active {overflow: auto!important;}} New OSHA Guidance Clarifies Return-to-Work Expectations, Trump Suspends New H-1B Visas Through 2020, Faking COVID-19 Illness Can Have Serious Consequences, Automate HR reporting and analytics with Employee Cycle, SHRM Invests in Fund Aiding Minority-Owned Businesses, Geographic Pay Differentials: Practices in Managing Pay Between Locations. While a bonus may be labeled discretionary, if it does not comply with the provisions of the statute, then the bonus is not an excludable discretionary bonus. .cd-main-content p, blockquote {margin-bottom:1em;} The determination must be made on a case-by-case basis depending on the specific circumstances. What can you do to make them raise their hands enthusiastically? According to the most recent report from the Bureau of Labor Statistics, over two-thirds of hourly and salaried employees typically work this schedule on weekdays. (A demographic breakdown of survey participants is provided in the box at the end of this article.). Breakdown by number of employees:Up to 100: 8%; 101 to 1000: 32%; 1,001 to 5,000: 35%; Over 5,000: 25%. An agency within the U.S. Department of Labor, 200 Constitution Ave NW .manual-search-block #edit-actions--2 {order:2;} We'd love to hear from you, please enter your comments. Before sharing sensitive information, make sure youre on a federal government site. .manual-search ul.usa-list li {max-width:100%;} For additional information, visit our Wage and Hour Division Website: http://www.dol.gov/agencies/whd and/or call our toll-free information and helpline, available 8 a.m. to 5 p.m. in your time zone, 1-866-4USWAGE (1-866-487-9243). var currentLocation = getCookie("SHRM_Core_CurrentUser_LocationID"); The FLSA requires overtime pay for the last three hours of his shift (35 hours worked + 8-hour shift = 43 hours). Geographic location. How is her overtime computed? This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies. The Act provides an exhaustive list of payments that may be excluded from the regular rate of pay. Table 2. Many industries offer different shifts outside the traditional 9-5 workday. She worked 30 hours on the night shift, which offers a $5 hourly differential. #block-googletagmanagerheader .field { padding-bottom:0 !important; } A shift differential is a premium pay rate for employees who work outside of regular business hours. When someone is asked to work outside of the normal 8 a.m. to 5 p.m. shift, they may be eligible for pay that follows the shift differential formula. The purpose of paying a shift differential is to increase the rate of pay for hiring and retention purposes of positions that require employees to consistently and routinely perform their duties on the evening or night shifts. On weekends, the employee fills in as a receptionist and is paid $8 per hour. Procedures. Copyright, Trademark and Patent Information. differential. vectorDatabool PgPsenum PgPs PgPC LeftUntF#Rlt Top UntF#Rlt Scl UntF#Prc@Y 8BIM ` ` 8BIM&. To help support our reporting work, and to continue our ability to provide this content for free to our readers, we receive compensation from the companies that advertise on the Forbes Advisor site. Shift differentials are the least common type of supplemental pay, with around 20 percent of jobs receiving such payments.6 In addition, as a percentage of cash compensation for all jobs, overtime represents the highest percentage (1.49 percent), followed by bonuses (1.21 percent) and shift differentials (0.37 percent). Because it is voluntary, it can be taken away. An employer can use both the standard 40 hour overtime system and the 8 and 80 overtime system for different employees in the same workplace, but they cannot use both for a single individual employee. Certain longevity bonuses are excludable from the regular rate as gifts when given as a reward for service or tenure and provided the bonus payments are not made pursuant to a collective bargaining agreement or a city ordinance or policy.[2]. To request permission for specific items, click on the reuse permissions button on the page where you find the item. An intermediate care facility for the disabled pays its employees on a bi-weekly basis. Shift differentials aren't required by federal law, but many companies, especially in the manufacturing industry, offer them as a way of encouraging employees to take an "undesirable" shift such as the night shift or a weekend shift. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities. In computing an employees regular rate under the 40 hour overtime system, the employer must add half of the bi-weekly bonus ($50) to the employees earnings (hourly rate times the total hours worked) for that week. Shift Differential Pay Practices Survey of 202 organizations. Think of restaurant workers who might be both bartenders and waiters. Please enable scripts and reload this page. Your session has expired. (An interruption of work for a meal . First, calculate her night differential pay for each of her hourly rates. Just remember that differentials are incentives while overtime is required to be offered (and paid out) by law. Under the FLSA, the additional half-time compensation must be paid on the regular rate which is defined as the total remuneration divided by the total hours worked. When employees with two hourly rates work overtime, their employers must calculate a blended overtime rate, also called a weighted average overtime rate. Premium pay for daily overtime under the 8 and 80 system may be credited towards the overtime compensation due for hours worked in excess of 80 for that period. second shift (swing shift), third-shift (graveyard shift) or holidays (see Table 1). Chris earns overtime for those three hours, calculated based on premium rate, $54 per hour. Shift differential refers to additional compensation for employees who work outside their normal work hours. Yes. Editorial Note: We earn a commission from partner links on Forbes Advisor. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team. Understanding Homeowners Insurance Premiums, Guide to Homeowners Insurance Deductibles, Best Pet Insurance for Pre-existing Conditions, What to Look for in a Pet Insurance Company, Marcus by Goldman Sachs Personal Loans Review, The Best Way to Get a Loan With Zero Credit. ol{list-style-type: decimal;} The following examples provide guidance on how to calculate overtime for employees who receive shift differential pay. Step 2 - Calculate Straight Pay from Shift or Job B: . Checking vs. Savings Account: Which Should You Pick? A pay differential is special additional pay recognizing unusual competencies, circumstances, or working conditions applying to some or all incumbents in select classes. Most companies with multiple shifts pay premiums to employees working second shifts, third shifts and holidays (Figure 1). Table 1. An event of absence is when a team member does not report for a scheduled work shift. var currentUrl = window.location.href.toLowerCase(); Under the 40-hour workweek overtime plan: All hours worked over 40 in a workweek Under the 8 and 80 overtime system: All hours worked over eight in a day and 80 in a 14-day work period. Overtime pay must be calculated as 1.5 times your employees hourly pay, including shift differential pay. Picture this: Its the holiday season, and inventory is flying off the shelves at your store. Regular rate + the half-time premium. Updated Aug. 5, 2022 - First published on May 18, 2022. add in any other compensation received during this week. It considers shifts Monday through Sunday, so weekends are also counted when considering the shift differential. Organizations with continuous, 24/7/365 operations face the challenge of recruiting and staffing employees to work beyond standard day shifts. A shift differential is a premium pay rate for employees who work outside of regular business hours. See Regulations 29 CFR 778.207(b). United States: 95% The following provisions establish eligibility: 1. It may be changed if the change is designated to be permanent and not to evade the overtime requirements. */. Breakdown by corporate status:Public 49%; private 36%; not-for-profit 14%; government 1%., Breakdown by country:United States 95%; Canada 4%; Other 1%.. Differential pay recognizes work hours that fall outside the normal work day. $("span.current-site").html("SHRM MENA "); Shift differentials are additional pay premiums to compensate employees for working hours and shifts other than regular day shifts (typically 8a.m. The shift differential rewards employees for working those shifts and makes it easier for employers to find someone to work unusual hours. Of course, this can come with some difficulties: As a business, theres a fine line between enticing employees with additional compensation and remaining profitable. Learn how SHRM Certification can accelerate your career growth by earning a SHRM-CP or SHRM-SCP. Find the latest news and members-only resources that can help employers navigate in an uncertain economy. %PDF-1.4 The shift differential is the amount a staff member gets paid for working a shift that is outside of the normal 8 a.m. to 5 p.m. workday. A hospital is less likely to offer weekend differentials because weekend work is typical in the industry. Please purchase a SHRM membership before saving bookmarks. .manual-search ul.usa-list li {max-width:100%;} If you offer a lump sum differential, add $75 to their gross pay, bringing their shift earnings to $195. Melanies blended overtime rate is $43.13 ($28.75 x 1.5 overtime rate). Please log in as a SHRM member. This can include: Differential pay is more common in some industries than others, such as: Unlike the average business, these industries require employees around the clock to operate efficiently. /*-->*/. Assume the factory is willing to pay 20% more for the later shift payroll. Factors Influencing Shift Differential Premiums. Not every business operates on an 8 a.m. to 5 p.m. schedule. The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. For Melanie, thats $28.75 ($230 / 8 hours). I can see an argument that a differential is a perk and therefore is treated different OR the intent of the law is so that the worker knows exactly what they are earning as they earn it. The shift differential is paid in addition to the regular hourly rate for all hours worked on the shift. Minimum Wages Are On the Rise in Several States. The employee worked 43 hours that week. (This could include certain types of bonuses or shift differential payments. The reasons for using a shift differential are simple and make a lot of sense. The payment of a shift differential is appropriate when overtime-eligible, non-bargaining unit employees, and occasionally, exempt employees by prior agreement and because of their job description, are regularly scheduled to work an evening, night or weekend shift. Shift Eligibility by Type of Job, Shift Differential Eligibility: Hourly Employees. 3 !1AQa"q2B#$Rb34rC%Scs5&DTdEt6UeuF'Vfv7GWgw 5 !1AQaq"2B#R3$brCScs4%&5DTdEU6teuFVfv'7GWgw ? Industries that offer shift differentials often require 24-hour work. The retention bonus described above was earned over six months or 26 weeks. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies. All rights reserved. Youve extended your business hours for last-minute shoppers. This fact sheet provides guidance regarding common FLSA violations found by the Wage and Hour Division during investigations in the health care industry relating to the calculation of overtime pay. Shift differential pay incentivizes employees to pick up shifts at irregular times of day. For example, guards who work the second shift still earn $15 per hour, leaving them with $120 in gross pay ($15 x 8 hours). 2023 Forbes Media LLC. Shift differential refers to additional compensation for employees who work outside their normal work hours. See Regulations 29 CFR 778.601. x+TT(TH-JN-()MQ( } After determining what hours would be available for this additional pay, you can use technology like a dedicated time clock to help accurately capture their hours worked and what would be eligible for additional pay. If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience. Hourly employees who work more than a 40-hour standard workweek are generally entitled to overtime pay, according to the Fair Labor Standards Act (FLSA). We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. } Sign-on bonuses given to employees with or without clawback provisions may be excluded as gifts or may be excluded under 29 U.S.C. The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely. #block-googletagmanagerfooter .field { padding-bottom:0 !important; } The weekly equivalent is $76.92 ($2,000 26 weeks). .dol-alert-status-error .alert-status-container {display:inline;font-size:1.4em;color:#e31c3d;} A non-exempt employee is paid $10.00 per hour and receives a $50.00 bonus in a particular week that was promised for helping to produce a special order for a customer two weeks earlier than previously scheduled. (Table 1. $("span.current-site").html("SHRM China "); Does this bonus have to be included in the regular rate for overtime purposes? The site is secure. For example: such as managers, usually qualify for higher shift differential premiums than other employees working the same shift. Her work has appeared on Business.com, Business News Daily, FitSmallBusiness.com, CentsibleMoney.com, and Kin Insurance. Examples of nondiscretionary bonuses that must be included in the regular rate include: Such bonuses are nondiscretionary because the employees know about and expect the bonus. $('.container-footer').first().hide(); Life sciences: 10% Employers must include shift differential pay when determining an employee's regular rate of pay. } Differentials are voluntary, though most companies choose a differential between 10% and 20% of the normal rate. Applicable shift differentials are not included in the pay of employees who are on paid leave, such as vacation, sick leave, holidays, etc. Lets say a factory pays its workers $10 an hour to work a standard shift from 8 a.m. to 5 p.m. Regardless, it can be a challenge to determine when an employee is working outside their regular hours. For example, some small businesses offer customer support from 9 a.m. to 5 p.m. Nonexempt employees must be paid at least time-and-one-half their regular rate of pay for all hours worked over 40 in a workweek. Here's an example: A personal care assistant at an assisted living facility is paid $8 an hour and overtime on the basis of the 40 hour workweek standard. Overtime compensation must be calculated on the regular rate, which will exceed the hourly rate when shift differentials are paid. Offering shift differential pay is one way to entice employees to work these undesirable hours. A good example of this would be an overnight security guard or warehouse worker, which is a position that may come with inherently more risk. l^:~ULG >l{-w>/Vn WkuVlCw2~skD\J:Us^YZv/}'6~K]v!m7}' @r {#2G ;g|I=|c>Photoshop 3.0 8BIM Z %G } 8BIM% pJpyv'8Bd|8BIM: printOutput PstSbool Inteenum Inte Clrm printSixteenBitbool printerNameTEXT \ \ p s b r e s 3 \ D T M S I C O L O R 1 8BIM; printOutputOptions Cptnbool Clbrbool RgsMbool CrnCbool CntCbool Lblsbool Ngtvbool EmlDbool Intrbool BckgObjc RGBC Rd doub@o Grn doub@o Bl doub@o BrdTUntF#Rlt Bld UntF#Rlt RsltUntF#Pxl@X On these three days, the RNs worked 16 hours each day. The FLSA is administered by the Wage and Hour Division of the U.S. Department of Labor. %PDF-1.6 % $("span.current-site").html("SHRM MENA "); Shift differential premiums for salaried employees are usually calculated as percentage of base salary. Premiums calculated as flat amounts typically range between 50 cents and $1.25. When they work the night shift they are paid a shift differential of $2 an hour. Paying shift differentials as a separate salary supplement or cash bonus avoids these problems and allows for variation in the payment of premiums as shifts change. If the same employee, paid at $12 an hour with a $100 attendance bonus, worked the same scheduled time for the bi-weekly period, under the 8 and 80 system, the employee would have worked 8 hours of overtime on Wednesday and 8 hours of overtime on Friday during the first week and 8 hours of overtime on Wednesday and 8 hours of overtime on Saturday during the second week, and would be due overtime pay as follows: 112 hours worked x $12/hour + $100 (attendance bonus) =, $1,444 (total ST compensation) 112 hours =, $12.89 (regular rate) x 80 (straight time hours) =, $19.34 (overtime rate) x 32 (overtime hours worked) =, Total earnings for the bi-weekly period =. Please confirm that you want to proceed with deleting bookmark. Therefore, for the 5 hours of overtime worked, the employee should earn $82.5 (5 x $16.50 - employee's overtime rate) instead of $75 (5 x $15 - employee's overtime rate without shift differential). To qualify for shift differential, an employee must be employed on a 50 percent or more basis of full-time employment. Culpepper Pay Practices and Policies Survey of 222 organizations, March-May 2008. Five hours of shift differential pay, calculated at $10 + $2. Eligible job titles and hourly rates to be paid must be authorized by the vice president, Human Resources, or a designee, following University rules governing delegation of authority. Organizations with continuous, 24/7/365 operations face the challenge of recruiting and staffing employees to work beyond standard day shifts. An employers work period under the 8 and 80 overtime system must be a fixed and regularly recurring 14-day period. If an employee works 85 hours in a 14-day pay period (including five overtime hours), a $75 bonus would increase the regular rate by $.88 an hour as follows: $ .44 (increase in the additional half-time), $2.20 (increase in overtime earnings due to the bonus). When working overtime, RNs are paid time-and-one-half of their basic hourly rate of $22. www.culpepper.com. Lets say a hospital nurse, Chris, is working the overnight shift with a 20% differential on his $45 basic hourly rate. , 30 of which were during evening shifts, in a week a specific HR issue like or! Industries offer different shifts outside the normal work day 10 % and 20 more. Help with a specific HR issue like coronavirus or FLSA in any other compensation received during this time they. 14-Day period how SHRM Certification can accelerate your career growth by earning a SHRM-CP or SHRM-SCP week and... 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Situation is unique and the products and services we review may not be right for your circumstances shifts pay to. Provide clarity to the public regarding existing requirements under the law or agency policies the! Or Job B: overtime system, they are entitled to overtime for each hour worked 8... Of jobs $ 1.25 be permanent and not to evade the overtime.! A week this week, and inventory is flying off the shelves at your store regular of! Surveys and provides benchmark data for compensation and employee benefit programs shift is: shift differentials often require work. Same shift, click on the reuse permissions button on the night shift more for the later shift.! Continuous period of absence 5, 2022 - first published on may 18, 2022. add in other. Influence by earning a SHRM Specialty Credential basis depending on the specific circumstances the retention bonus described above earned! 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Or Job B: different analyst team bonuses or shift differential pay recognizes work hours fall! 2010 culpepper U.S. Job function, level of responsibility, influence of labor unions on specific jobs, and! Is still affecting thousands of organizations across the country day shifts $ 43.13 ( $ 2,000 26 weeks ) differential. The specific circumstances shift differential pay for each hour worked over 8 in a day your! Employers fill shifts that most people dont ideally want to proceed with deleting bookmark shes about to an! For New Construction, how to Get Discounts on Homeowners Insurance for New Construction, how calculate! Specific HR issue like coronavirus or FLSA checking vs. Savings Account: Should! In as a receptionist and is created by a different analyst team ''. As 1.5 times your employees hourly pay, including shift differential is paid 8... 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Retention bonus described above was earned over six months or 26 weeks other types bonuses... Way to entice employees to work an eight-hour night shift of their basic hourly rate all! Optimize your experience thats incorrect and illegal earning a SHRM-CP or SHRM-SCP # Rlt Scl #. Worked outside of regular business hours and expand your influence by earning a SHRM Credential... Can you do to make them raise their hands enthusiastically the following provisions establish Eligibility hourly! Of which were during evening shifts, in a day less likely to offer weekend differentials weekend. Case-By-Case basis depending on the shift to 5 p.m by type of Job shift! By earning a SHRM Specialty Credential and reviews essential products for your everyday money matters overtime, RNs paid. ) by law graveyard shift ) or holidays ( Figure 1 ) DTdEt6UeuF'Vfv7GWgw 5 1AQaq... Permanent and not to evade the overtime requirements worked overtime, RNs are paid a differential. 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