Shift Differential Pay Practices

By Leigh Culpepper and Jeremy Greenup Jun 16, 2008
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Organizations with continuous, 24/7/365 operations face the challenge of recruiting and sta​ffing employees to work beyond standard day shifts. An effective practice used by many employers is paying employees a premium to work undesirable shifts. Results from a recent Culpepper Pay Practices & Policies Survey highlight shift differential practices including eligibility and amounts paid. (A demographic breakdown of survey participants is provided in the box at the end of this article.)

Shift differentials are additional pay premiums to compensate employees for working hours and shifts other than regular day shifts (typically 8a.m. to 6p.m., Monday-Friday).

Key Findings

92 percent of companies pay shift differentials to hourly employees.

36 percent pay shift differentials to salaried employees.

Shift Differentials for Hourly Employees

Most companies pay shift differentials to hourly employees working second shift (“swing shift”), third-shift (“graveyard shift”) or holidays (see Table 1).

Table 1.
Shift Differential Eligibility for Hourly Employees

Percent of Companies
Paying Shift Differentials

All Companies

92%

Number of Employees

Up to 100

72%

101 to 1,000

91%

1,001 to 5,000

96%

Over 5,000

93%

Industry Sector

Technology

91%

IT services

94%

Semiconductor

100%

Software

83%

Telecom/Internet services

94%

Life sciences

96%

Health care services

100%


Shift differential premiums for hourly employees are usually calculated as either a percentage of hourly pay rate or as an additional flat amount. Premiums calculated as a percentage of hourly pay rate typically range between 5 and 15 percent. Premiums calculated as flat amounts typically range between 50 cents and $1.25.

Shift Differential Eligibility for Salaried Employees

Approximately one-third of companies pay shift differentials to salaried employees working second shift (“swing shift”), third-shift (“graveyard shift”) or holidays (see Table 2).

Table 2.
Shift Differential Eligibility for Salaried Employees

Percent of Companies
Paying Shift Differentials

All Companies

36%

Number of Employees

Up to 100

10%

101 to 1,000

26%

1,001 to 5,000

31%

Over 5,000

60%

Industry Sector

Technology

40%

IT services

60%

Semiconductor

64%

Software

36%

Telecom/Internet services

46%

Life sciences

30%

Health care services

35%

Shift differential premiums for salaried employees are usually calculated as percentage of base salary. Amounts typically range between 5 and 15 percent of base salary.

Factors Influencing Shift Differential Premiums

Shift differential premiums vary depending on a number of factors, including:

Job function and level of responsibility.

Influence of labor unions on specific jobs.

Geographic location.

Type of shift.

For example, employees with higher levels of responsibility, like managers, usually qualify for higher shift differential premiums than other employees working the same shift. Additionally, some respondents reported having different shift differential payments for jobs covered by labor unions than nonunion jobs.

Differentials for Second Shift, Third Shift and Holidays

Shift premiums can also vary based on the time and length of shift and the number of days and hours worked per week. Many companies will pay a higher shift differential premium for employees working graveyard and holiday shifts.

W. Leigh Culpepper, CCP, GRP, CBP, is president and CEO of Culpepper and Associates Inc., which conducts worldwide salary surveys and provides benchmark data for compensation and employee benefit programs. Jeremy Greenup, CCP, is a research analyst at the firm.

Reposted with permission

Source: Culpepper Pay Practices & Policies Surveys, June 2008, www.culpepper.com

Data source:

Culpepper Pay Practices and Policies Survey of 222 organizations, March-May 2008.

Breakdown by industry sector:
Technology: IT services 8%; semiconductor 6%; software 9%; telecom/Internet services 8%; other tech 14%.

Life sciences: Biotechnology 3%; medical devices/equipment 5%, other life sciences 6%.

Health care services: 10%

Other industry sectors: 31%.

Breakdown by number of employees:
Up to 100: 8%; 101 to 1000: 32%; 1,001 to 5,000: 35%; Over 5,000: 25%.

Breakdown by corporate status:
Public 49%; private 36%; not-for-profit 14%; government 1%.​

Breakdown by country:
United States 95%; Canada 4%; Other 1%.

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