Shift differential premiums vary depending on a number of factors, including. If an employee moves to another shift, rescinding the premium requires a base salary cut, a difficult action to communicate to an employee without affecting morale and productivity. var currentUrl = window.location.href.toLowerCase(); Employers that add weekend hours during the holiday season might offer differential pay for those irregular hours. Providing premiums within base salary compounds the costs of regular salary increases, incentive payouts and other benefit costs. This is the most common method for salaried employees. 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. Please log in as a SHRM member before saving bookmarks. Add the $50 to the employee's regular earnings in each workweek the employee worked overtime to figure out their regular rate of pay and overtime due for that week. If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience. Shift Differentials: Compensation for Working Undesirable Hours, New OSHA Guidance Clarifies Return-to-Work Expectations, Trump Suspends New H-1B Visas Through 2020, Faking COVID-19 Illness Can Have Serious Consequences, Holiday Employee Gift Giving in a Post-Pandemic World, Employers Get Innovative with Compensation, Average US Pay Increase Projected to Hit 4.6% in 2023. Chris earns overtime for those three hours, calculated based on premium rate, $54 per hour. Discretionary bonuses are excludable from the regular rate of pay. The Fair Labor Standards Act (FLSA) states that, unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular pay rates. She works three eight-hour day shifts at $8 an hour and . .manual-search-block #edit-actions--2 {order:2;} 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. $('.container-footer').first().hide(); Lets say a factory pays its workers $10 an hour to work a standard shift from 8 a.m. to 5 p.m. For example: A team member who is out three consecutive days will have one event of absence. p.usa-alert__text {margin-bottom:0!important;} The weekly equivalent is $76.92 ($2,000 26 weeks). For example in a 2 week period where Dwayne works 90 hours and 32 of those hours he earns an extra $1 in shift differential. Shift differential will be included in the regular rate calculation for the computation of overtime. Members can get help with HR questions via phone, chat or email. On these three days, the RNs worked 16 hours each day. 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. This fact sheet provides general information regarding bonuses and the regular rate of pay under the FLSA for non-exempt employees. 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. In lieu of paying shift differentials, some companies compensate employees for working undesirable shifts with additional paid time off. It gives an employee more money to choose a shift that others might not want to work. Lets say a hospital nurse, Chris, is working the overnight shift with a 20% differential on his $45 basic hourly rate. A bonus is discretionary only if all the statutory requirements are met: Examples of some common bonuses that may be excludable discretionary bonuses if they meet the statutory requirements include: The label assigned to the bonus and the reason for the bonus do not conclusively determine whether the bonus is discretionary. .table thead th {background-color:#f1f1f1;color:#222;} The resulting total compensation would be divided by the total hours the employee worked during that week to determine the regular rate. Shift differentials are not legally required, but theyre a common perk given to employees who agree to work at odd hours or on holidays. These payments are not required by law, but can be useful for retaining employees in posts that would otherwise be hard to fill. #block-googletagmanagerheader .field { padding-bottom:0 !important; } Example B: Shift differential plus nondiscretionary bonus. Shift differential refers to additional compensation for employees who work outside their normal work hours. Most companies with multiple shifts pay premiums to employees working second shifts, third shifts and holidays (Figure 1). Shift differential refers to additional compensation for employees who work outside their normal work hours. $Y\ "eEWE\]!,,dQPP&}_=sam Washington, DC 202101-866-4-US-WAGE1-866-487-9243, Administrator Interpretations, Opinion and Ruling Letters, Resources for State and Local Governments, An employee paid biweekly at a rate of $12 per hour plus a $100 attendance bonus, working a schedule of 56 hours per week as shown in the chart below, would be due overtime pay as follows. Melanies blended overtime rate is $43.13 ($28.75 x 1.5 overtime rate). Just remember that differentials are incentives while overtime is required to be offered (and paid out) by law. In lieu of paying shift differentials, some companies compensate employees for working undesirable shifts with additional paid time off. #block-googletagmanagerfooter .field { padding-bottom:0 !important; } DE zjZ:70 Breakdown by number of employees:Up to 100: 8%; 101 to 1000: 32%; 1,001 to 5,000: 35%; Over 5,000: 25%. Although incorporating shift premiums into an employee's base salary might be the least difficult way to deliver them, problems can result from this approach: Image source: Author. Jobs covered by labor unions might have different shift differential payments than nonunion jobs. www.culpepper.com, How to Calculate Overtime Rates for Shift Differentials, SHRM Tools and Templates, December 2010, SHRM payments. See WAC 357-28-190. Dwayne has earned $8.25 during 58 hours and $9.25 for 32 hours. Begin using differential pay to differentiate your organization and operate more efficiently today with PayClock. When they work the night shift they are paid a shift differential of $2 an hour. .dol-alert-status-error .alert-status-container {display:inline;font-size:1.4em;color:#e31c3d;} Scott and Renee are taxed the same way even though they earned $600 in different ways. Its hard to get employees to set their alarms for the middle of the night to get to work. Please enable scripts and reload this page. Many industries pay shift differentials to employees who work outside regular hours, but differential amounts and when theyre offered vary by industry. A non-exempt employee is paid $10.00 per hour and receives a $50.00 bonus that was promised in a particular week for helping to produce a special order for a customer two weeks earlier than previously scheduled. (Effective 7/1/2019) Supplemental Shift Premium for Nurses: For the classes of registered nurse and related job classes requiring a licensure as a registered nurse, supplemental shift premium shall be paid in the amounts and under the following conditions: See An employers work period under the 8 and 80 overtime system must be a fixed and regularly recurring 14-day period. The site is secure. Culpepper Pay Practices & Policies Survey highlight shift differential practices including eligibility and amounts paid. Now you can calculate the blended overtime rate by multiplying the average hourly rate by 1.5. Past performance is not indicative of future results. 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. Reposted with permissionSource: Since it can be less desirable to work the graveyard shift or weekend shifts,. Shift differentials can be anywhere from 5% to 20%, with most averaging between 10% and 15%. Though governments have no mandates on shift differentials, theyre common in the following industries: Most industries that offer shift differentials have employees working all hours of the day. 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). Shift differential rates are calculated by each organization, meaning theres no standard for this type of additional compensation. An agency within the U.S. Department of Labor, 200 Constitution Ave NW The diner is 24/7, so Melanie works the night shift sometimes. temp_style.textContent = '.ms-rtestate-field > p:first-child.is-empty.d-none, .ms-rtestate-field > .fltter .is-empty.d-none, .ZWSC-cleaned.is-empty.d-none {display:block !important;}'; SHRM Online resource "How to Calculate Overtime Rates for Shift Differentials."). See Regulations 29 CFR 778.107. For example, employees with higher levels of responsibility, like managers, usually qualify for higher shift differential premiums than other employees working the same shift. Employees will get paid $12 per hour to work non-ideal shifts. 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. The regular rate is defined as the total remuneration divided by the total hours worked. An agency within the U.S. Department of Labor, 200 Constitution Ave NW $("span.current-site").html("SHRM China "); Her entire shift is subject to both shift differential and overtime pay. $("span.current-site").html("SHRM MENA "); Some employees have multiple hourly rates depending on the task theyre performing. How is her overtime computed? The following is an example of how to compute overtime pay based on the employees regular rate: $10.00 per hour x 43hours = $430.00 (total compensation for straight time), $430.00 + $50.00 (bonus) = $480.00 (total compensation), $480.00 43 hours = $11.16 (regular rate), $11.16 x .5 = $5.58 (half time premium pay rate), $5.58 x 3 overtime hours = $16.74 (overtime pay due). 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. A nondiscretionary bonus is a bonus that fails to meet the statutory requirements of a discretionary bonus. Please purchase a SHRM membership before saving bookmarks. Results from a recent. To start, determine the normal rate. When the economy is unstable, employers are faced with difficult decisions around staffing, pay and benefits. Even if we go into a recession. shift differential pay is one dollar per hour. Overtime compensation must be calculated on the regular rate, which will exceed the hourly rate when shift differentials are paid. add in any other compensation received during this week. 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. Join us at SHRM23 as we drive change in the world of work with in-depth insights into all things HR. Example: Single Shift Differential . In the following calculation, the $2,000 retention bonus was earned over six months or 26 weeks, for a weekly equivalent of $76.92 ($2000 26 weeks). The diner pays a $10 shift differential. How To Find The Cheapest Travel Insurance, How To Calculate Shift Differential in 4 Steps, Best Payroll Services For Small Businesses, SurePayroll Review: Plans, Pricing And Features. 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. Step 1: Determine Straight Time Pay = Total Hours x Hourly Rate, Step 2: Determine Shift Premium Pay = Number of Hours Worked on Shift x Shift Differential Rate, Step 3: Determine Total Compensation = Straight Time Pay + Shift Premium Pay + Other Compensation, Step 4: Determine the Regular Rate = Total Compensation Total Hours, Step 5: Determine the Overtime Pay Amount = RR x 0.5 x OT Hours, Step 6: Determine Total Gross Pay (Before Taxes) = Total Compensation + Overtime Pay. Type of shift. 1 0 obj Registered nurses (RNs) at a skilled nursing facility are paid a basic hourly rate of $22 an hour. While most businesses pay shift differentials as a percentage of an employees basic rate, you can express the differential as a dollar amount. When the economy is unstable, employers are faced with difficult decisions around staffing, pay and benefits. The FLSA does not require overtime pay for hours in excess of eight hours worked in a day, except as discussed below, or for hours worked on Saturdays, Sundays, or holidays. The FLSA is administered by the Wage and Hour Division of the U.S. Department of Labor. A shift differential is an extra boost in pay given to employees when they work on late shifts. Washington, DC 202101-866-4-US-WAGE1-866-487-9243, Administrator Interpretations, Opinion and Ruling Letters, Resources for State and Local Governments. Overtime pay is calculated based only on payments to the employee that are required to be included in the regular rate of pay. Take a look at some common examples of how shift differentials are used: To calculate the shift differential, you need to know the starting rate of the employee and the actual differential. OT rate x OT hours. 2010 Culpepper U.S. .cd-main-content p, blockquote {margin-bottom:1em;} The average for this additional compensation typically ranges between 5% and 15% of the base salary. .manual-search-block #edit-actions--2 {order:2;} Minimum Wages Are On the Rise in Several States. second shift (swing shift), third-shift (graveyard shift) or holidays (see Table 1). @media only screen and (min-width: 0px){.agency-nav-container.nav-is-open {overflow-y: unset!important;}} 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). 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. The key with overtime is that the 40 hours per week has been exceeded, and the employee gets more money because of that. 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