Shift Differential

What is Shift Differential?

The term Shift Differential refers to the premium pay rates that employees receive for hours worked outside the traditional 9:00 am to 5:00 pm. shift. Shift differentials make shifts that are outside normal business hours more attractive for workers. It is also referred to as the “graveyard shift” but can also include hours that are worked on public holidays.

Around 4% of the workforce work the overnight shift exclusively, with another 12% working rotating shifts where some overnight work is required. Typically, employees working on the second and third shifts are in sectors such as manufacturing, transportation, customer support, and healthcare.

How does the Shift Differential work?

Shift differential pay rates are not legally required as per the Fair Labor Standards Act. Although employers can choose how much to pay employees for extra hours worked, and when to pay them, the rates should not be different among employees. For example, someone working on the weekend shift should receive equal compensation as someone in a similar role and comparable working hours.

Mostly, differential rates are calculated by using an employee's hourly wage and adding a certain percentage to it. Hourly workers generally receive an extra 5% to 15% of their hourly wages when they work extra hours. This additional hourly payment often ranges from $0.50 to $1.25 per hour, depending on several conditions, such as employee scarcity or how undesirable the hours are.

Conclusion

Having a fair, consistent, and well-organized framework for shift differentials is part of maintaining a healthy company. However, take note that payroll deductions will stay the same, as the time of day that employees are working should not exempt them from such deductions.