What types of shifts qualify for shift differential pay?

Employers may offer differential pay for shifts that some employees consider less desirable. These shifts include evening hours (after 3 pm), night shifts (usually 11 pm to 7 am), weekends, and holidays. Some companies provide differentials for rotating schedules or on-call duties. Businesses that want to maintain 24-hour operations may opt for a shift differential to encourage employees to take on unpopular work shifts.

How do employers calculate shift differential pay for employees?

Employers typically calculate shift differential with a flat hourly rate or a percentage increase. For the flat rate method, they add a specific dollar amount to the base wage for the qualifying shifts. If they use a percentage increase, they multiply the base rate by a predetermined factor, most often between 5% and 25%. To track these calculations automatically and ensure accurate payment, businesses can use a digital payroll administration system.

What is the difference between shift differential and overtime pay?

Non-exempt employees who work more than 40 hours in a workweek have a right to overtime pay under federal law. Employers may offer shift differentials as a voluntary benefit with flexible terms. In that case, employees can receive both if they work a shift that qualifies for a shift differential and exceeds full-time hours.