Shift premium: Overview, definition and example
What is a shift premium?
A shift premium is an additional payment made to employees who work outside of regular business hours, such as night shifts, weekends, or holidays. It compensates employees for working less desirable hours and helps employers attract and retain workers for critical operations that require staffing beyond standard daytime shifts.
For example, a hospital may pay a 15% shift premium to nurses working the night shift to compensate them for the inconvenience of working overnight hours.
Why is a shift premium important?
Shift premiums are important because they provide financial incentives for employees to work during non-traditional hours, ensuring that businesses maintain productivity and operational continuity. Industries such as healthcare, manufacturing, transportation, and emergency services rely on shift work to function efficiently.
For employees, shift premiums increase earnings and help compensate for the challenges of working non-standard hours, such as sleep disruption and social limitations. For employers, offering shift premiums reduces turnover, attracts skilled workers, and ensures coverage for essential roles during evenings, nights, or weekends.
Without shift premiums, employers may struggle to fill less desirable shifts, leading to labor shortages, operational inefficiencies, and potential service disruptions.
Understanding shift premiums through an example
Imagine a 24-hour manufacturing plant operates in three shifts: morning (8 AM–4 PM), evening (4 PM–12 AM), and overnight (12 AM–8 AM). To encourage workers to take the less desirable evening and overnight shifts, the company offers a shift premium of $2 per hour for evening shifts and $3 per hour for overnight shifts.
In another example, a retail store needs employees to work on holidays. To incentivize coverage, the store offers a holiday shift premium of 1.5 times the regular hourly wage, ensuring sufficient staff availability during high-traffic shopping days.
An example of a shift premium clause
Here’s how a shift premium clause might appear in an employment agreement or collective bargaining agreement:
“Employees scheduled to work shifts between [Insert Time Range] shall receive a shift premium of [Insert Amount or Percentage] in addition to their regular hourly wage. This premium applies only to hours worked during qualifying shifts and does not apply to paid time off or other non-worked hours.”
Conclusion
A shift premium is a key incentive for employees working outside standard business hours, ensuring fair compensation for less desirable shifts. For businesses, offering shift premiums helps maintain operational efficiency, attract skilled workers, and reduce turnover. Clearly defining shift premium policies in employment agreements ensures transparency and compliance with labor regulations.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.