Shift differential

What is a shift differential?

A shift differential is additional compensation paid to employees who work less desirable or non-standard hours, such as evenings, nights, weekends, or holidays.

This premium is added on top of the employee’s regular base wage and is often used as an incentive to fill critical shifts outside of the standard nine-to-five workday.

Where are shift differentials common?

Shift differentials are common in industries that require 24/7 coverage or round-the-clock operations, such as healthcare, manufacturing, transportation, hospitality, and customer support. The rate of shift differential pay may be a flat amount (e.g., $2 per hour) or a percentage of the employee’s base pay (e.g., 10% more per hour).

Unlike overtime, shift differential pay is not mandated under the Fair Labor Standards Act (FLSA). However, if an employer offers shift differentials, the additional pay must be factored into the employee’s regular rate of pay when calculating overtime for non-exempt employees.

Why does this matter for employers?

• Attract and retain talent for off-peak or less desirable hours
• Improve staffing coverage for evenings, nights, and weekends
• Maintain compliance with wage and hour laws for non-exempt employees working overtime

Employers should clearly define shift differential policies in employment contracts or handbooks, including which shifts are eligible, how the premium is calculated, and how it affects overtime pay. Consistency and transparency are key to avoiding payroll errors or employee disputes.

Note that, in unionized workplaces or certain jurisdictions, shift differentials may be required by collective bargaining agreements or local labor laws.

How can Remote help?

Remote enables employers to configure custom pay rules, including shift differentials, for distributed teams. We ensure correct calculation and compliance across jurisdictions, including where shift-based premiums are customary or regulated. Learn more.