Shift Differential Pay Practices

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).

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).

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