Shift Differential: Overcoming Staffing Challenges

If your business operates beyond the traditional Monday through Friday daytime business hours, you may want to consider implementing a shift differential. This compensation system incentivizes workers to sign on for shifts that may otherwise be difficult to cover. 

 

Learn what shift differential pay is, how it can help you recruit and retain qualified employees and how to use a shift differential calculator to determine shift-specific pay rates for your company. 

 

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What is shift differential pay? 

Shift differential pay is a premium pay rate provided to employees who work shifts scheduled outside of regular business hours, which are widely accepted to be 8am to 5pm on weekdays. According to the U.S. Bureau of Labor Statistics, over two-thirds of hourly and salaried workers typically work on weekdays, while just 9% work on the weekends. 

 

Non-regular hours include evening, overnight and weekend shifts, as well as shifts booked on holidays. Some businesses also offer a shift differential for split shifts, even if they occur during the daytime.  

 

Are businesses required to offer shift differential pay? 

No. Shift differential pay isn’t required under the Fair Labor Standards Act

 

What’s important to note is that by law, the shift differential pay rate is considered to be the regular rate for purposes of calculating overtime pay. This means that an employee who earns $18 per hour, plus a $2 per hour shift differential, would be entitled to receive a rate of $30 per hour for time-and-a-half overtime. 

 

The exception to this may be in unionized workplaces, since it’s common for labor unions to request shift premiums when negotiating collective agreements. 

 

Outside of a unionized environment, as an employer, the decision to offer a shift differential is entirely up to you. 

 

How a shift differential can help you overcome staffing challenges

While shift differential pay rates aren’t required by law, the practice of paying a higher hourly rate to employees who work evenings, overnights and weekends is common. 

 

Health care, hospitality, manufacturing, security and transportation are among the industries where shift differentials have become the norm. Workers in these industries have come to expect they’ll be paid a higher hourly rate in exchange for working the second or third shift. 

 

Using a shift differential as a recruiting tool

Offering an attractive shift differential or shift premium is a common recruiting strategy among employers who need staff coverage outside of regular business hours. Finding candidates willing to work evenings, nights and on weekends has long been a challenge, particularly in locations with relatively low unemployment rates. 

 

Consider listing your shift differential pay rates in your job descriptions, or if you aren’t comfortable disclosing your rates, at least mentioning that shift differential pay is available. This simple step can give your business the competitive edge that’s needed to attract job seekers. 

 

Expand operations with shift differentials

Another way you can use shift differential rates to overcome staffing challenges is to offer a premium pay rate when adding a second or third shift to your staff schedule. 

 

For many companies, the ability to scale up operations often hinges on the availability of quality employees who are willing and able to sign on to work evening, overnight and weekend shifts. 

 

Adopting shift differential rates may enable your business to build on your successes and increase your market share. 

 

Responding to seasonal staffing needs with shift premiums

Another way to utilize shift differential pay to meet operational requirements is by implementing a shift differential on a seasonal basis. 

 

This approach can be an effective way to meet temporary or seasonal staffing needs. For example, if you operate a retail business and you’ve decided to expand your hours during the holiday season, providing a shift premium may help you attract employees who are willing to work longer hours in exchange for better compensation. 

 

The same is true for other seasonal industries, such as food processing, event management, landscaping and snow removal and, in some markets, construction. As an employer, you may find the added labor costs that come with offering a shift differential are justified by the increase in revenue you’re able to realize by expanding your hours of operation. 

 

Keep in mind that you shouldn’t assume candidates will be willing to work evenings, nights or weekends in exchange for a higher pay rate. It’s a good idea to discuss shift premiums and scheduling with job seekers during a phone interview, as this can help you and the applicant decide whether to advance the hiring process. 

 

Shift differential calculator

Determining compensation for employees who earn a shift differential is a relatively straightforward process. 

 

Simply add the amount of the shift differential, which is the difference between the standard or regular pay and premium rates, to the employee’s regular pay rate. Multiply this amount by the number of hours the employee works during qualifying shifts to determine their gross weekly pay. 

 

For example, if the employee’s regular hourly rate is $20, and your business offers a flat 10% shift differential, they’d receive a gross hourly rate of $22 for all shifts worked outside of regular business hours. 

 

If an employee works an overtime shift that’s covered under your company’s shift differential plan, the overtime rate is calculated by multiplying the enhanced differential rate by one and a half. 

 

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