Shift Differential - UNM Policy 3500. Example B: Shift differential plus nondiscretionary bonus A non-exempt employee is paid $15.00 per hour plus an evening shift differential of $1.00 per hour for all hours worked during an evening shift. Is this in compliance with the FLSA overtime standard? In this 12-page report, we've outlined the top 25 business tax deductions you could be taking (and 5 to watch out for)! While the FLSA strictly monitors employees’ earnings, it doesn’t require employers to provide shift differentials or premium pay for overnight, weekend or holiday shifts. When employees with two hourly rates work overtime, their employers must calculate a blended overtime rate, also called a weighted average overtime rate. All hours paid in cash at 1.5 times the employee’s hourly rate (plus differentials). .dol-alert-status-error .alert-status-container {display:inline;font-size:1.4em;color:#e31c3d;} .usa-footer .container {max-width:1440px!important;} FORM OF OT PAYMENT Cash 1½ times the employee’s “regular rate of pay” for the workweek, which includes certain amounts beyond hourly wage (shift differential, on call pay). In addition, section 7(g)(2) of the FLSA allows, under specified conditions, the computation of overtime pay based on one and one-half times the hourly rate in effect when the overtime work is performed. An employer’s work period under the 8 and 80 overtime system must be a fixed and regularly recurring 14-day period. Trump just signed off on a second COVID relief package, and it includes a lot -- such as simplified PPP loan forgiveness. p.usa-alert__text {margin-bottom:0!important;} If an employee paid under the 8 and 80 system of overtime receives the same $2,000 retention bonus after six months, the employee would be due an additional $13.77 in overtime earnings after working 95 hours, 17 of which are overtime hours, in a 14-day period as follows: $ .81 (increase in the additional half-time), $13.77 (increase in overtime earnings due to the bonus). Now we’ve launched The Blueprint, where we’re applying that same rigor and critical thinking to the world of business and software. While employers are not required to pay their employees additional wages for overnight work, workers may find that wages can be higher on overnight shifts due to shift differentials. All hours actually worked by an employee, excluding hours paid for vacation, holiday or sick leave. In an effort to attract more nursing personnel, a skilled nursing facility’s nursing department gives hourly paid LPNs and RNs a $2,000 bonus after being employed six months. Her total earnings for the 8 hours of overtime are $102. A guard whose basic rate is $25 per hour has a premium rate of $30 per hour. Trying to decide between two popular software options? 4.15.1 Shift differential is pay for working inconvenient hours and schedules authorized at the agency’s discretion. Source: Unsplash. Does this bonus have to be included in the regular rate? The FLSA requires overtime pay for the last three hours of his shift (35 hours worked + 8-hour shift = 43 hours). It includes a very wide variety of applications focused on sales, marketing and customer service. Under the FLSA, "overtime" means "time actually worked beyond a prescribed threshold." The state of Florida follows the guidelines of the Fair Labor and Standards Act (FLSA). Get clear, concise answers to common business and software questions. Let’s say you own a jewelry store with a 24/7 security guard. See Regulations 29 CFR 778.200 or call 1-866-4US-WAGE and request a copy of Regulation Part 778 Interpretative Bulletin on Overtime Compensation. The second Monday is a holiday and the employee works that day -- a total of 84 hours worked in the pay period, In addition, the employee receives a 10% post differential. Marty typically makes $25/hr and has a differential pay of $5/hr for night shift work. Overtime may be computed on the regular rate of pay, determined by the weighted average of the two rates. Please try again. Looking to grow your skills? div > div.guidance-search > div.csv-feed.views-data-export-feed {display:none;} Shift differential premiums for salaried employees are usually calculated as percentage of base salary. Examples of Overtime Calculations: Here are some examples of calculating overtime under federal law. Nonexempt employees must be paid at least time-and-one-half their “regular rate” of pay for all hours worked over 40 in a workweek. Shift differential pay incentivizes employees to pick up shifts at irregular times of day. If an employee works overtime during the 26 week period, the increase in the regular rate is calculated by dividing $76.92 by the total hours worked during the overtime week. Overtime compensation must be calculated on the regular rate, which will exceed the hourly rate when shift differentials are paid. Melanie’s gross pay for the shift is $345 ($43.13 x 8 hours). The “regular rate” includes an employee’s hourly rate plus the value of some other types of compensation such as bonuses and shift differentials. Under the 8 and 80 overtime system, they are entitled to overtime for each hour worked over 8 in a day. Employers also must include shift differential pay when determining an employee’s regular rate of pay. Overtime compensation must be calculated on the regular rate, which will exceed the hourly rate when shift differentials are paid. § 201 et seq. Here’s what his timecard looks like: Marty worked 16 total night shift hours, which added $80 … What is a common shift differential pay amount for hourly employees? We’ve done the expert research, so you don’t have to. The Motley Fool has a Disclosure Policy. Night differential is a premium that is paid to eligible employees for all work and paid training or travel time performed between 6:00 p.m. and 6:00 a.m. See Regulations 29 CFR 778.200 and 778.208. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies. Many employers think you calculate FLSA overtime based on an employee’s basic hourly rate, but that’s incorrect and illegal. Next, determine her gross pay without overtime by multiplying each premium hourly rate by the number of hours spent in each role. She worked 30 hours on the night shift, which offers a $5 hourly differential. Non Union Shift 2 - paid when at least ½ of hours worked are between 4:30 p.m. and midnight the following day. Some jobs may be governed by a different FLSA overtime threshold. You can offer a standard $5 increase for second shift hours and a $10 increase on third shift hours. The https:// ensures that you are connecting to the official website and that any information you provide is encrypted and transmitted securely. This publication is for general information and is not to be considered in the same light as official statements of position contained in the regulations. If an employee works 85 hours in a 14-day pay period (including five overtime hours), a $75 bonus would increase the regular rate by $.88 an hour as follows: $ .44 (increase in the additional half-time), $2.20 (increase in overtime earnings due to the bonus). Chris already worked 35 hours this week before going into the eight-hour shift. 3 evenings x 8 hours/evening x $1/hour (shift differential), Regular rate and half-time premium computation, $408 (total ST compensation) ÷ 48 (total hours worked) =, $ 8.50 (regular rate) + $ 4.25 (half-time premium) =, 8 overtime hours x $12.75 (overtime rate) =, Example: Two Different Shift Differentials. You’ll be getting our best advice soon! We've tested, evaluated and curated the best software solutions for your specific business needs. All remuneration for employment (including shift differentials and bonuses) except those payments specifically excluded by statute. Shift differential refers to additional compensation for employees who work outside their normal work hours. Choosing the best applicant tracking system is crucial to having a smooth recruitment process that saves you time and money. The retention bonus described above was earned over six months or 26 weeks. The resulting total compensation would be divided by the total hours the employee worked during that week to determine the regular rate. Here are five of the most common payroll liabilities your small business will encounter. Chris’s premium pay is $54 per hour ($45 basic hourly rate x 1.2 shift differential). Always check to ensure calculations comply with both federal and state law. div#block-eoguidanceviewheader .dol-alerts p {padding: 0;margin: 0;} However, an employee who performs two or more different kinds of work, for which different straight time hourly rates are established, may agree with his or her employer in advance of the performance of the work that he or she will be paid during overtime hours at a rate not less than one and one-half time the hourly rate established for the type of work he or she is performing during the overtime hours. Scott and Renee are taxed the same way even though they earned $600 in different ways. Employees covered by the FLSA, unless exempt, must receive overtime pay for hours worked beyond 40 in a workweek at a rate not less than time and one-half their regular rate of pay. Employees who earn shift differential must also have their “regular rate of pay” adjusted to reflect the shift differential. Industries that offer shift differentials often require 24-hour work. Since it can be less desirable to work the graveyard shift or weekend shifts, employers incentivize their workforce with a premium hourly rate. You might find shift differentials in parts of the hospitality industry, such as hotels where the check-in desk must always be staffed. Fair Labor Standards Act (FLSA) FLSA Categories; Paid Time & Overtime; Compensatory Time; Shift Differential; Volunteers, Employees, and Independent Contractors; Knowledge Check; Department of Labor (DOL) Resources Shift differentials are not legally required, but they’re a common perk given to employees who agree to work at odd hours or on holidays. Melanie has already worked 40 hours this week, and she’s about to work an eight-hour night shift. An employee paid biweekly at a rate of $12 per hour plus a $100 attendance bonus, working a schedule of 56 hours per week as shown in the chart below, would be due overtime pay as follows: 56 hours worked x $12/hour + $50 (weekly bonus equivalent) =, $722 (total ST compensation) ÷ 56 hours worked =, $12.89 (regular rate) + $6.45 (half-time premium) =, 40 (straight time hours) x $12.89 (regular rate) =, 16 (overtime hours) x $19.34 (overtime rate) =, Overtime Computation under the 8 and 80 System. 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