Wage Drift

What Is Wage Drift?

The amount an employee is actually paid at the conclusion of the pay period differs from their basic salary, which is known as wage drift. Additionally, it may be used to describe the discrepancy between an employee's basic salary and their overall remuneration. Due to company bonuses and overtime pay, the actual wages/total remuneration are typically higher than what was agreed upon.

What Causes Wage Drift, and Why?

Unpredictable or uneven demand is typically the root cause of wage drift; as a result, businesses are forced to require overtime work from their staff. This could lead to:

Overtime: Workers who put in overtime hours are compensated at 1.5 times their standard hourly rate.

Employers may reward teams or specific employees with bonuses for achieving a goal. It may just be a matter of satisfying client demand with a small workforce in the case of wage drift.

Additional duties: If an employee is absent due to illness or leaves the company without notice, another employee may need to take on some of their duties until the vacant position is filled. Employers may provide this employee with additional salary as they juggle the extra duties.

What Negative Effects Does Wage Drift Have on an Employer?

Wage drift is a result of unanticipated factors that might make it difficult for businesses to forecast exact earnings throughout pay periods. Budgeting may be challenging due to wage drift.

How Can You Compensate for Wage Drift?

Although paying workers their rightful wages is a requirement, there are various things businesses may do to better control wage drift:

Putting off payment until the end of the payment period is referred to as paying in arrears. Most employers follow this standard procedure. By doing this, you'll be able to plan out how much to pay your employees.

Put a stop to bonuses: If your business is having financial trouble and wage drift is straining your budget, you might put a stop to company bonuses.

What Types of Employers Are Most Likely to Experience Wage Drift?

If your organization engages in any of the following, you'll probably experience wage drift:

• Employs personnel who receive hourly pay
• Provides money for overtime
• Company-wide bonuses are available
• Operates with a reduced staff
• Employers are scheduled to work a maximum number of regular hours each week

Conclusion

When an organization faces unforeseen demands and obligations that force employees to put in more time, wage drift typically occurs. The personnel accrue a differential over their base compensation (which was negotiated) for the job performed after regular working hours and receive overtime pay for it. This phenomenon generally occurs in sectors or geographic locations that experience very erratic short-term demand, such as tourism or high-growth economies. The discrepancy between an employee's basic pay and their gross pay at the end of a work period is another example of wage drift. Due to bonuses and overtime pay, the actual salaries and total compensation are typically larger than what was initially agreed upon.