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What are some common types of differential/premium pay?

Although the Fair Labor Standards Act (FLSA) does not require private employers to provide differential or premium pay to employees (outside of overtime pay of time and a half over 40 hours in a workweek), many employers will reward their employees with additional pay in various situations. Employer practices vary widely on this issue. Some reasons for differential pay practices may include shift work, call-back work, weekend work and hazardous or dirty duty.

Shift Differential

The most frequently offered type of differential pay is given for specific work shifts and is common in the manufacturing industry. First-shift hours are considered to be “normal,” commonly 7 a.m. to 3 p.m., and are paid at a “base” rate. Later hours—second and third shifts—are typically less desirable, and as a result, many employers are able to encourage workers to work these later shifts by providing a higher hourly rate via a differential added to the base rate. Employers must remember to calculate overtime properly, particularly when the nonexempt employee receives shift differentials in addition to his or her normal hourly base pay rate. See How to Calculate Overtime Rates for Shift Differentials.

Call-back Premiums

Call-back premiums are provided for work performed after normal hours, such as during a workplace emergency. The employer might choose to pay a higher hourly rate for call-back hours worked, such as double time (double the hourly rate) or triple time (three times the employee’s normal hourly rate). Another way to pay call-back premiums might be to pay the employee for more hours than he or she actually worked or a minimum number of hours. For example, if an employee is called back to work for one hour, the employer might have a policy to provide premium pay of a minimum of two hours, even when the employee doesn’t work two hours.

Weekend and Holiday Premiums

A higher rate of pay may be offered for work performed over a weekend or on a company-provided holiday when weekend and holiday work is not part of the employee’s regular schedule. For example, work performed on a Saturday may be paid at time and a half whereas work performed on a Sunday or a holiday might be paid at double an employee’s regular hourly rate. Some states have laws requiring premium pay for work performed on weekends or holidays.

Hazard Pay

This type of pay is often offered when workers are deployed to countries involved in a war or conflict or in situations where individuals may be directly exposed to hazards on the job (e.g., handling explosives or hazardous chemicals). Employees would typically receive the regular rate of pay for their job plus an additional hourly hazard pay rate, although some employers will provide hazard pay in the form of lump sum bonuses based on the length of the hazardous duty.

Whatever your company practice for differential or premium pay, it is important to have a written policy that clearly communicates the amount of additional pay employees receive and under what circumstances. SHRM offers several sample policies:

Shift Differential Policy

Paid Holidays Policy with Premium and Overtime Pay Provisions

Hazardous Duty Pay Policy  

On-call Pay Policy: Emergency Call-back


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