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:

  • Rate adjustment factor: Add an amount to the employee's hourly rate.

  • Earnings adjustment factor: Add a flat amount to the total earnings.

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:

  • Select Unit Override Rate as the payment type

  • Enter the shift differential.

Taxes page: Deselect Elig for Shift Differential.

Calculation page:

  • Indicate either Single Earnings or Special Accumulator as the type, and then enter the specific earnings code or accumulator.

  • Select Hours in the Based on Amount or Hours option.

  • Enter the earnings code that you set up for shift pay based on other earnings.

  • Do not enter an hourly rate.

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:

  • Enter the percentage factor in the Multiplication Factor field.

  • Select either Single Earnings or Special Accumulator as the type, and then enter the specific earnings code or accumulator.

  • Select Amount in the Based on Amount or Hours option.

  • Enter the earnings code that you set up for shift pay based on other earnings.

  • Do not enter an hourly rate.

Additional Pay Hourly Rate

General page: Select Hours Only as the payment type.

Taxes page: Deselect Elig for Shift Differential.

Calculation page:

  • Select either Single Earnings or Special Accumulator as the type, and then enter the specific earnings code or accumulator.

  • Select Hours in the Based on Amount or Hours option.

  • Enter the earnings code that you set up for shift pay based on other earnings.

  • Enter the employee's hourly shift differential in the Hourly Rate field.

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:

  1. Set up setIDs.

    See Understanding PeopleSoft HCM System Data Regulation.

  2. Verify or add values to the Translate table to identify the shifts that you intend to set up.

  3. 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.

    See Setting Up the Shift Table.

  4. Link a shift SetID to a pay group.

    See Setting Up Pay Groups.

  5. Assign employees to a valid shift on the Job Information page.

    See Job Information Page.

  6. 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.

    See Earnings Table - Taxes Page.

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:

  1. 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.

  2. The Shift table to determine how you've defined each shift and whether there are any associated shift differentials that affect earnings.

  3. 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.