Pay Policies

New shift schedules are truly a win-win opportunity for your employees and the company. They can improve your operational efficiency while simultaneously providing better time-off for the workforce. However, one of the quickest ways to make a schedule change a lose-lose proposition is to make a mistake with the schedule’s pay and work policies.

Most companies start with pay policies that were originally designed for eight-hour, Monday through Friday shift schedules. The policies are usually designed to minimize costs for normal operations, while providing premium compensation when the employees are asked to work outside of their regular schedule. They also provide an easily understood way to compensate the workforce for holidays, vacations, and other paid time-off.

If you are thinking about changing shift schedules (or have already done so), you also need to think about tailoring your pay policies to fit the new schedule. If you don’t change your policies with the schedule, chances are the old policies will:

  • Increase labor costs.
  • Be illogical, and therefore difficult to understand.
  • Appear to be unfair to different work groups, lowering morale.  
  • Create situations that take pay away from employees, and give them extra pay in others, usually resulting in even lower morale.

Tailoring Pay Policies to the Shift Schedule

Our experience has shown that the best strategy for designing new pay policies that fit the schedule will include the following goals:

  • Ensure that the workforce has the ability to make as much money on the new schedule (for the same hours of work) as what they have made on their current schedule. The idea is to protect their compensation – especially for “guaranteed” compensation such as their normally scheduled straight time hours. The first question that most shiftworkers have when a schedule change is suggested is “What is going to happen to my pay?” You want to be able to answer affirmatively that you are taking steps to protect it.
  • Protect the company from increased labor costs caused by the wrong pay policies. Most new shift schedules can be implemented without significantly increasing the cost for coverage. In fact, the right shift schedule and pay policies should lower your production cost/unit while still protecting employee compensation.

Where Are the Potential Problems?

While each situation is unique, the most common problems with old pay policies arise from:

  • Unbalanced workweeks. This results in overtime in some weeks, and less than 40 hours of work in others. The cost to the company for this problem can be tremendous. Hours that could have been paid at straight time with the right policies, are paid as overtime. This problem can often be corrected by changing the start of the workweek.
  • Vacation tracking and pay. Traditional vacation systems often track vacation time in days or weeks. This no longer works when a day is not eight hours long, or a week is not five work days.
  • Holiday pay policies. This is one of the most difficult issues to solve and explain to the workforce. You need to answer questions such as: How do you handle holiday pay if an employee was not scheduled to work on that holiday? Should they be paid for eight hours, or the number of hours they are scheduled to work? How many holidays should you have? How do you keep paychecks whole without significantly increasing holiday benefits (and costs)?
  • Double-time. Old policies usually result in either the employee losing double-time opportunities they had in the past, or significantly increasing double-time costs to the company.
  • Overtime and absence coverage. How do you cover an absence if you are working 12-hour shifts? How do you distribute overtime fairly?
  • Breaks, lunches, shift differential, attendance systems, meal pay, and many other policies can also come into play when you change schedules.

The consultants at Shiftwork Solutions have addressed these issues many times over. We can help you design pay policies that are tailored for your shift schedule, company, and employees.

Call us today for a free consultation.