Fair Labor Standards Act
Under the Fair Labor Standards Act, an employer is not required to provide shift differential pay. However, if an employer chooses to do so, the differential pay must be included in the regular rate of pay for purposes of calculating overtime. Because shift differential pay is not required, employers are free to establish their own policies on shift differentials as long as they meet minimum wage and overtime law.
Nonexempt employees who are scheduled to, and do, work an evening, night, or weekend shift.
How to Calculate Shift Differentials
When an employer offers workers a shift differential, that rate of pay must be used to determine the employee’s overtime earnings if she works more than 40 hours in a workweek as required by the FLSA. For instance, a worker who earns $10 per hour and an additional $0.50 per hour for a weekend shift differential, works three 10-hour shifts on Monday, Wednesday, and Friday, and two more on Saturday and Sunday. Because she earns overtime on the 10 hours worked on Sunday, her employer must pay her $15.75 per hour for that shift, or 150 percent her normal earnings for that shift. This is calculated from 1.5x her wage per hour ($10 x 1.5), which equals $15. Then the weekend shift differential also is taken into consideration with overtime (.5 x 1.5), which equals $.75. The wage per hour and shift differential, then combined with overtime, equal $15.75.
Shift differential premiums for salaried employees vary, but are usually calculated as percentage of base salary. Amounts normally 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, managers, who often have a higher level of responsibility, usually qualify for higher shift differential premiums than other employees working the same shift.
Different Pay Policies
While the Civil Rights Act bars employers from providing differential pay solely on a discriminatory basis, it does not require that all employees receive differential pay for the same shift. Differential pay can vary for each employee because it can be used to reward a worker that normally does not work that shift. Differential pay could also be dependent on negotiations with his or her employer.