Understanding Shift Pay Calculation Methods
Payroll for North America provides a variety of methods for setting up and calculating shift pay.
This topic discusses:
Comparison of shift pay methods.
Earnings code based on other earnings or special accumulator.
Earnings code with adjustment factor.
Pay group setID and Shift table.
This topic describes the shift pay methods and then compares them.
Shift Method Descriptions
This table describes the primary shift pay methods:
Method |
Description |
---|---|
Earnings based on other earnings or accumulator. |
Create a separate earnings code for shift differential based on another earnings code or a special accumulator of earnings and pay it out as other earnings. You can set up shift differential as a percentage of amount (amount based) or a flat rate per hour (hours based). |
Rate adjustment factor or earnings adjustment factor. |
Add an adjustment factor to applicable earnings on the earnings table:
|
Pay group setID and Shift table. |
Create each applicable shift for a setID on the Shift table. Assign each employee to one of these shifts. Specify the shift differential on the shift table or at the employee level in Job data. |
Shift Method Comparisons
This table briefly compares the shift pay methods:
Method |
Use Shift Table? |
Earnings Elig for shift |
Additional Pay Setup |
Shift Earnings to Paysheet |
Shift Pay on Paycheck |
---|---|---|---|---|---|
Earnings based on other earnings or accumulator |
No |
Deselected |
Assign shift earnings code. |
System adds shift earnings code as other earnings. No manual paysheet entry. |
Separate |
Rate adjustment factor or earnings adjustment factor |
No |
Deselected |
Assign shift earnings code. |
System adds shift earnings code as other earnings. Manually enter shift hours. |
Separate |
Pay group setID and Shift table |
Yes |
Selected |
Not required |
No separate shift earnings code. No manual paysheet entry. |
Not separate |
The following sections describe these methods in more detail.
Use the Based on Other Earnings/Hours group box on the Earnings Table - Calculation page to calculate shift pay based on either hours or amount of another earnings code or a special accumulator.
Calculation Description
This table describes the pages and fields that you can use to enter shift differential when you base the shift pay on other earnings:
Page |
Shift Differential Entry |
Description of Shift Earnings Calculation |
---|---|---|
Earnings Table - General |
Unit/Override Rate |
Shift differential rate times hours of the specified earnings or accumulator. |
Earnings Table - Calculation |
Multiplication Factor |
Shift differential percent times the amount of the specified earnings or accumulator. |
Additional Pay |
Hourly Rate |
Shift differential rate times hours of the specified earnings or accumulator. |
Setup Summary
This table summarizes how to set up shift pay using each of these calculation methods:
Shift Differential Entry |
Earnings Table Setup Summary |
Additional Pay Setup Summary |
---|---|---|
Unit Override Rate |
General page:
Taxes page: Deselect Elig for Shift Differential. Calculation page:
|
Note: If you set up an earnings code for shift pay that uses the unit/override rate and is based on a single earnings code, you must ensure that you include the shift earnings code on each payline that contains the earnings on which it is based. For example, if the shift earnings is based on the REG earnings, and if you manually add an additional REG payline to the paysheet, you must manually add the shift earnings code to that payline as well. |
Multiplication Factor |
General page: Payment type must be Amounts Only. Taxes page: Deselect Elig for Shift Differential. Calculation page:
|
|
Additional Pay Hourly Rate |
General page: Select Hours Only as the payment type. Taxes page: Deselect Elig for Shift Differential. Calculation page:
|
|
Example of Shift Calculations When Based on Other Earnings
All of the example calculations use this data:
Variable |
Value |
---|---|
Shift earnings based on single earnings code |
REG (base pay earnings) |
Shift-eligible hours in pay period |
40 |
REG earnings for pay period |
$400.00 |
Base pay hourly rate |
$10.00 |
This table shows the shift calculation for each differential entry method:
Differential Entry |
Value |
Shift Earnings Calculation |
Total Earnings (REG + Shift) |
---|---|---|---|
Unit Override Rate |
$2.00 |
40 x $2.00 = $80.00 |
$480.00 |
Multiplication Factor |
.5 |
$400.00 x .5 = $200.00 |
$600.00 |
Hourly Rate in Additional Pay |
$3.00 |
40 x $3.00 = $120.00 |
$520.00 |
Note: The system reports the regular earnings and the shift earnings separately on the paycheck.
You can set up earnings codes for shift pay using these factors on the Earnings Table – Calculation page:
Factor |
Description |
---|---|
Rate Adjustment Factor |
An amount that adjusts the hourly rate that is associated with the earnings. |
Earnings Adjustment Factor |
An amount that adjusts the total earnings amount calculated for the earnings. |
Here are some additional considerations for using earnings code adjustment factors to calculate shift pay:
The paysheet must contain the shift earnings code in Other Earnings.
The system adds the shift earnings code during paysheet creation if you set it up on the Create Additional Pay page for the employee.
You must enter the shift hours for each shift code on the employee's paysheet.
You cannot use these adjustment factors to base the shift pay on other earnings or special accumulators.
You can use these factors in conjunction with the Hourly Rate field on the Create Additional Pay page for the employee.
Example: Rate Adjustment Factor Calculation
The system uses this method to calculate the shift pay with a rate adjustment factor:
Step |
Formula |
---|---|
Calculate new hourly rate |
hourly rate (job data or additional pay) + adj. factor = new hourly rate |
Calculate the amount of pay |
new hourly rate x hours = amount |
This example shows the calculation of a rate adjustment factor of $5.50 for an employee who worked 8 hours with an hourly rate of $10.00 in the pay earnings record:
Step |
Example |
---|---|
Calculate new hourly rate |
$10.00 + $ 5.50 = $15.50 |
Calculate the amount of pay |
$15.50 x 8 = $124.00 |
Example: Earnings Adjustment Factor Calculation
The system uses this method to calculate the shift pay with an earnings adjustment factor:
Step |
Formula |
---|---|
Calculate earnings amount |
hours x hourly rate (job data or additional pay) = earnings amount |
Calculate new earnings amount |
earnings amount + factor = new earnings amount |
This example shows the calculation of an earnings adjustment factor of $25.00 for an employee who worked 8 hours with an hourly rate of $10.00 in the pay earnings record:
Step |
Example |
---|---|
Calculate earnings amount |
8 x $10 = $80 |
Calculate new earnings amount |
$80 + $25 = $105.00 |
This topic discusses:
Summary of shift pay setup using the Shift table.
Example of relationship between setID, pay group, and shift.
Shift differential processing.
Shift differential calculation formulas.
Examples of shift differential calculations.
Note: This method of calculating shift applies only to hourly and exception hourly employees, based on the employee type specified on the employee's job data. The system does not calculate shift pay for employee type S (salaried).
Summary of Shift Pay Setup Using the Shift Table
To set up shift differential using the pay group setID and the Shift table:
Set up setIDs.
Verify or add values to the Translate table to identify the shifts that you intend to set up.
Set up shifts for setIDs, specifying the differential as a rate, a factor, or both.
Note: You can set up the same shift differential for all employees in the shift, or you can specify the differential separately on the Job Information page for each employee assigned to the shift.
Link a shift SetID to a pay group.
Assign employees to a valid shift on the Job Information page.
See Job Information Page.
Select Elig. for Shift Differential (eligible for shift differential) on the Earnings Table - Taxes page for applicable hourly earnings codes.
Selecting this check box triggers shift processing during paysheet creation and payroll calculation.
Relationship Between SetID, Pay Group, and Shift
The employee's shift differential is based on the Shift table entry for the setID of the employee's pay group and the employee's shift assignment.
This example shows the shift table entries for a second shift that has two rate differentials that are linked to different setIDs:
SetID |
Shift ID |
Differential |
---|---|---|
SHARE |
Shift 2 |
$1.00 |
USA |
Shift 2 |
$2.00 |
Two pay groups are assigned to shift 2.
This table illustrates that the setID assigned to the pay group identifies the correct shift 2 differential for that pay group:
SetID |
Pay Group |
Shift 2 Differential |
---|---|---|
SHARE |
Weekly A |
$1.00 |
USA |
Biweekly B |
$2.00 |
Shift Differential Processing
Here's how payroll processing uses the setup data:
The Paysheet Creation COBOL SQL process (PSPPYBLD) uses job data to populate the shift value on the paysheet.
The Pay Calculation COBOL SQL process (PSPPYRUN) validates the shift value on the paysheet against the Shift table and against the setID that is associated with the employee's pay group.
To process shift pay, the system checks:
Employees' job records and paylines to verify that you have assigned each of them to a shift and that the employee type in job data is hourly or exception hourly.
The Shift table to determine how you've defined each shift and whether there are any associated shift differentials that affect earnings.
The Earnings table to see whether the earnings are eligible for shift differential.
There must be an entry on the Shift table for the setID that is linked to the pay group. If a shift value is not defined on the Shift table, the system generates an error message during pay calculation that the shift value was not found.
Note: If your organization doesn't use multiple shifts, you must still set up the Not Applicable (N/A) shift with blank values in the Shift table for each pay group setID. N/A is the default shift in Job data. Setting up this entry in the Shift table avoids potential processing errors if an earnings code is created with Elig for Shift Differential selected (the default value), which would trigger the shift pay processing of the employee's shift identified in Job data.
Shift Differential Calculation Formulas
This table defines terms used in shift differential calculation:
Term |
Definition |
---|---|
Shift rate |
The shift differential expressed as a flat amount per hour. |
Shift factor |
The shift differential percentage. |
Pay rate |
The hourly rate in the Pay Earnings record. |
Hours worked |
The number of hours associated with the earnings code for that pay period. |
The system follows these steps to calculate shift differentials:
Step |
Formula |
---|---|
Calculate the shift premium |
shift rate + (shift factor × pay rate) = shift premium |
Adjust the total earnings eligible for shift differential |
(pay rate + shift premium) × hours worked = adjusted earnings |
Example: Shift Differential Calculations
In this example, the company set up three shifts and shift differentials as follows:
Shift |
Rate |
Factor |
---|---|---|
1 |
$0.50 per hour |
|
2 |
|
10 percent |
3 |
$1 per hour |
15 percent |
This table shows the earnings calculation in each shift for an hourly employee earning $10.00 an hour and working 40 shift-eligible hours:
Shift |
Step 1. Shift Premium Calculation |
Step 2. Earnings Calculation |
---|---|---|
1 |
$0.50 + (0 × $10) = $0.50 |
($10 + $0.50) × 40 = $420 |
2 |
0 + (0.10 × $10) = $1 |
($10 + $1) × 40 = $440 |
3 |
$1 + (0.15 × $10) = $2.50 |
($10 + $2.50) × 40 = $500 |
Note: The system does not report shift earnings calculated with the Shift table as a separate earnings code or earnings line on paychecks and reports such as the payroll register.