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Shift differential refers to extra pay received by employees for working a less-than desirable shift (i.e., late nights, evenings). Shift differential pay is an integral part of each eligible employee's gross compensation and is subject to the same payroll deductions and payroll charges as regular salary or wages. The shift differential pay is added to the base hourly rate before the calculation of an overtime rate.
The offering of such a premium payment is a matter of negotiation between an employer and employee (or employee's representative). Eligible employees and hours which qualify for shift differential pay vary, as well as the amount of compensation offered for working such hours.
While there may be other employees working the same shift without extra pay, it is not necessarily due to a discriminatory intent. The employees receiving a shift differential may simply be being rewarded for working outside of their normal schedule, or benefiting from negotiating better terms in bargaining with the employer.
The following is an example of a shift differential policy of an employer:
"Shift differential is additional compensation intended to recognize time worked outside of day shifts. Job titles included and hourly rates to be paid must be authorized by the Vice President, Human Resources. All nonexempt employees in these titles who work at least eight (8) full hours during the evening and/or night shift will be paid appropriate shift differential. There are two exceptions: (1) An employee called in for the remainder of a shift will be paid any applicable shift differential, and (2) Hours worked during the shifts following an employee's regular shift will be paid the higher applicable shift differential only if the hours are worked on a "call-in/call-back" basis. Shift differential will apply to hours for paid time off such as sick leave, vacation, etc., only if the employee is normally scheduled to work an eligible shift. Shift differential must be included in determining overtime and in lump sum payments of accrued vacation."