Many companies find that offering employees different pay rates is a quick & easy incentive structure for filling undesirable work schedules. For example, a medical practice that is open standard hours during the Monday to Friday workweek may also be open for limited hours with reduced staffing on the weekends. Often times, it can be a struggle to fill coverage gaps with late notice, however companies offering employees a higher pay rate through either a percentage or flat dollar rate are more apt to fill these gaps quickly and with less complaints.
It sounds great in theory, but how do you actively track different pay rates in the real world without doubling the time you spend on payroll?
Our advice: let technology do the work for you.
You’ll want to work with a time clock solution that can accommodate this scenario easily and translates over to payroll without doing extra work.
1. Standard pay rate(s) data should be entered into your time clock system.
You should ask your payroll vendor if they have a way to synchronize this data automatically, otherwise you will need to enter in the rates manually yourself. (Our time clock and payroll solution does this for you.)
2. Setup a new pay code in your time clock for each pay rate rule.
For example, in a nursing home, your policy may be to factor in +$3.00/hr for aides working the midnight shift (let’s say 10:00pm to 6:00am). Your time clock configuration should allow you to create a pay code called “MIDNIGHT” which then adds $1.00 to the employee’s default pay rate only for worked hours during that period of time. You could get super-creative and have multiple rules which accounts for periods of time and also days of week, but make sure your time software can accommodate this first.
3. Double-check on overtime pay processing to ensure the “Blended” calculation is used in accordance with federal and state laws.
When employees work variable hourly rates, a weighted average formula is used to determine the rate of pay for overtime hours worked. For more information on how this calculation works, you can review this DOL fact sheet.
4. Make sure your time clock system can talk to your payroll system when it’s time to process at pay period end.
For differential shift calculations, your time clock export should include all new pay codes with their corresponding hours and pay rates. You will also need to include the Overtime pay code, hours and custom blended pay rate.