Shift Differentials: Compensating Employees for Working Undesirable Shifts

Organizations with continuous, 24/7/365 operations face the challenge of recruiting and staffing employees to work beyond standard day shifts. An effective practice used by many employers is paying employees a premium to work undesirable shifts. The following article highlights results from the 2010 Culpepper U.S. Shift Differential Pay Practices Survey.

Shift differentials are additional pay premiums to compensate employees for working hours and shifts other than regular weekday shifts.

Key Findings

Shift differentials are more common in manufacturing and customer support jobs than in other types of jobs.
Third shift is consistently paid at a slightly higher rate than second shift.
Holiday shifts are typically paid at “time and a half” or 1.5 times base rate.
In lieu of paying shift differentials, some companies compensate employees for working undesirable shifts with additional paid time-off.

Shift Differential Eligibility
Shift differentials are more common in manufacturing and customer support jobs than other types of jobs (Table 1).

Table 1: Shift Eligibility by Type of Job
Department / Job Function	Percent of Companies
Manufacturing & Production	83%
Customer Service & Support	59%
Transportation & Distribution	51%
Information Technology (IT)	49%
Facilities	49%
Healthcare: Nurses	48%
Healthcare: Other Services	47%
Healthcare: Physicians	9%

Shift Differential Eligibility: Hourly Employees
Most companies with multiple shifts pay premiums to employees working second shifts, third shifts, and holidays (Figure 1). In lieu of paying shift differentials, some companies compensate employees for working undesirable shifts with additional paid time-off.

Figure 1: Shift Differential Eligibility for Hourly Employees

Hospitals and healthcare service organizations pay differentials more often than other types of organizations for both holiday (78%) and weekend shifts (68%).

Methods for Calculating Shift Differentials: Hourly Employees
Companies are nearly equally split on the method used to calculate shift differentials for hourly employees. Forty-nine percent pay shift differentials as an additional flat amount per hour and
47 percent calculate the differential as a percent of the hourly base rate (Figure 2).

Figure 2: Methods for Calculating Shift Differentials for Hourly Employees

Shift Differential Eligibility for Salaried Employees
Nearly one fourth of companies with multiple shifts pay premiums to salaried employees working shifts other than regular workday shifts (Figure 3).

Figure 3: Shift Differential Eligibility for Salaried Employees

Methods for Calculating Shift Differentials: Salaried Employees
Most companies pay their salaried employees an additional percentage of base salary for working less desirable shifts (Figure 5).

Figure 4: Methods for Calculating Shift Differential Payment for Salaried Employees

Only two percent of companies “bake” shift differentials into salaries and pay a higher base salary.

Although incorporating shift premiums into an employee's base salary may be the least difficult way to deliver them, problems result from this approach. Providing premiums within base salary compounds the costs of regular salary increases, incentive payouts, and other benefit costs. If an employee moves to another shift, rescinding the premium requires a base salary cut, a difficult action to communicate to an employee without affecting morale and productivity.

Paying shift differentials as a separate salary supplement or cash bonus avoids these problems and allows for variation in the payment of premiums as shifts change.

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, and 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 non-union jobs.

Shift premiums can also vary based on the time and length of shift and the number of days and hours worked per week.

Shift Differential Amounts
In addition to the data presented above, we provide a more comprehensive report with the following data tables:

Shift Differential Amounts for Hourly Employees as % of Base Hourly Rate
with breakouts for 2nd Shift, 3rd Shift, Holiday Shifts, Weekend Shifts
Shift Differential Amounts for Hourly Employees as Additional Flat Amount per Hour
with breakouts for 2nd Shift, 3rd Shift, Holiday Shifts, Weekend Shifts
Shift Differential Amounts for Hourly Employees as % of Base Salary
with breakouts for 2nd Shift, 3rd Shift, Holiday Shifts, Weekend Shifts
Shift Differential Amounts for Hourly Employees as Additional Flat Amount per Hour
with breakouts for 2nd Shift, 3rd Shift, Holiday Shifts

Availability of Comprehensive Report as Downloadable PDF

Free to Participants in 2010 U.S. Shift Differential Pay Practices Survey
Free to Subscribers of Culpepper Pay Practices & Policies Surveys
(includes Culpepper Library and Small Company Plus Subscribers)
$395 for non-participants and non-subscribers (Order Form)

Data Source: Culpepper U.S. Shift Differential Pay Practices Survey of 202 organizations.
Survey Dates: July 16 - September 17, 2010

Breakdown by Industry Sector:
Technology: 47%

Network/Internet/Telecom Services 10%, IT Services 8%, Software 7%, Hardware/Electronics/Semiconductor 6%, Aerospace & Defense 4%, eBusiness/Online Content 3%, Other Tech 9%

Life Sciences: 10%

Medical Devices/Equipment 4%, Biotechnology 2%, Pharmaceutical 2%, Lab Services & Research 2%

Healthcare Services 10%

Other Industry Sectors 33%

Breakdown by Number of Employees:
Up to 100: 8%, 101 to 500: 20%, 501 to 2,500: 33%, 2,500 to 10,000: 23%, 10,000: 16%

Breakdown by Corporate Status:
Public 49%, Private 36%, Non-Profit 14%, Government 1%

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Shift Differentials Amounts by Job and Geographic Location
In addition to the shift differential data provided in the Shift Differential Pay Practices Report, Culpepper Compensation Surveys provide the following compensation breakouts for hourly employees by type of job, job level, and geographic location:

Base Hourly Pay Rates
2nd Shift Hourly Premium Rate
3rd Shift Hourly Premium Rate
Weekend 1st Shift Hourly Premium Rate
Weekend 2nd Shift Hourly Premium Rate
Weekend 3rd Shift Hourly Premium Rate
Holiday Shift Hourly Premium Rate
Hourly Pay Range Structures