Shift Differential

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Shift Differential

What is Shift Differential?

Shift differential is a way for the employers for their human resources needs fulfillment in terms of not hiring additional workers for the 24/7 business needs. This way the existing workforce is available on a certain pre-agreed amount of compensation - to be paid to them by their employers - to work at odd, but direly needed, times for the industry or employer.

In emergent situations, or a daily run show of organizational activities, when it comes to your shifts to a must run for 24 hours a day and 7 days a week, you need more workers to hire and put them into shifts and rounds to coup up your production facility inevitable needs and meet market demands and standards. Shift differential is the replacement solution for this sort of scenario.

In other cases, employers may choose to pay paid time off to their employees instead of shift differentials, again as per mutually agreed arrangement between the two parties – say worker and the employer.  

When it comes to the shift differential, employers have to pay a handsome amount to the second shift workers than the first or the day shift ones, and similarly, a higher payment is made to third shift workers than the second shift ones, along with the weekend shift differentials to those.

The employees working the same shift (say 9 to 5 job) are routinely known as the straight shift employees who are not working overtime. Others are overtime workers, contingent staff, hourly employees, others might draw premium pay – the employees who work in less desirable hours and get higher pay rates per hour wage; etc.

For the small businesses or the large ones, the employers need their employees to work timely for business production purposes, and market reputation. And, collectively in organizations both the parties – employer as well as employees – mutually agree upon a win-win situation making profits each.

What jobs might be under the domain of Shift Differential?

Following are the jobs under the domain of shift differentials:

  • Security jobs
  • Healthcare professionals
  • Customer support services
  • Telemarketing
  • Manufacturing workers
  • Industry jobs
  • Productions facilities
  • Electric generation jobs
  • Railways
  • Airports
  • Other transportation jobs
  • Nuclear facilities – but with limited exposure to radiation according to health physics
  • Taxi service providers
  • Internet and Info-tech service providers
  • Software houses
  • Any other as per your business requirements

What is Shift Differential Pay?

Employees who perform a less favorable shift or undesirable shift, such as evening or midnight shifts, receive additional compensation known as shift differential pay. The employer sets the shift differential rate, which can be negotiated with the employee.

How to calculate Shift Differential Pay?

Calculating Shift Differential is not a big deal but it needs adequate payroll personnel attentiveness because it is workers’ compensation against the input they are putting into the business, especially during crucial time of the hour business needs like evenings and nights.

  • Let us say if salaried employees get $ 20 per hour and the shift differential is 10% of the per hour wage rate, hence the total amount per hour for every extra hour of work would be $ 22 (that is through the addition of $ 2 as 10% of the $ 20 per hour wage included into the wage rate of a worker working on evenings or nights). 
  • Another example can be consumer support services, let us say if an employee worked late hours and gets $ 1 extra added into the wage hourly rate for extra input, hence at the month-end if the number of those hours is 25 in total, the employee concerned will earn $ 25 an additional payment against the extra input of hourly work done. 
  • Caretakers, for instance, may get an additional amount of $ 100 per shift for working night shifts, therefore, they draw as much amount as they work night shifts and multiplied by $ 100 as their shift rate. 
  • And similarly, for working on holidays, usually employees make a full and a half equivalent to their existing hourly rate. Say an employee has an hourly wage rate of $ 10, hence every hour working on the holiday would be equal to $ 15 (adding half of the exiting rate into the hourly wage rate of that employee). And the monthly check of the employee would be covering the weekends the employee worked and that would be as 1.5 of the routine rate. 
  • Shift differential is taxed as the way regular wages are taxed. Moreover, the legal advisors and concerned information material may be well searched as the rates of tax may change from time to time and thereupon you are advised to refer to the official budgets of your Country for the concerned FY - financial year.