How Do I Calculate Overtime If I Pay a Shift Differential?

2.28.2024

The Department of Labor (DOL) has specific rules on how overtime must be paid. Overtime is paid at 1.5 times a worker’s “regular rate” not their hourly rate. If you do not pay overtime correctly, you may be required to pay the amount owed, plus 200% in liquidated damages and if the employee hired an attorney, the attorneys’ fees; as previously mentioned in the New Jersey Passes Wage Theft Law blog.

Here is the formula for calculating overtime pay for employees who work a shift differential:  OT = (Straight-Time Pay / # of hours worked) x 1.5

Below is an example of how to calculate an employee’s wages during a week where he/she worked regular shifts and night shifts.

Example: Jane is a licensed practical nurse at a nursing home. When she works the day shift, which is 8 hours long, she gets paid a regular hourly wage of $20. But when she works the 8-hour night shift, there is a shift differential of 10%, so she gets paid $22 for those hours worked. 

This week, Jane worked 4 day shifts and 2 night shifts. That is a total of 48 hours. How much overtime wages does Jane get?

Step #1 – Calculate Straight-Time:

First, calculate the Jane’s “straight-time” pay, which is how much she would make per hour without overtime added. Use this number to figure out Jane’s overtime wage:

• 4 days x 8 hours-per-day x $20-per-hour = $640
• 2 nights x 8 hours-per-night x $22-per-hour = $352

Without overtime, Jane should get a total straight time pay of $992 ($640 + $352)

Step #2 – Calculate Regular Rate:

To calculate Jane’s “regular rate,” use her straight-time pay divided by the number of hours she worked:

• $992 / 48 hours = $20.67

Step #3 – Calculate Overtime Rate:

Multiple Jane’s regular rate by 1.5 (because overtime must be paid at one-and-a-half times a worker’s regular rate), to ascertain her overtime rate:

• $20.67 x 1.5 = $31

Step #4 – Total wages to be paid:

• 4 days x 8 hours-per day x $20-per-hour = $640
• 1 night x 8 hours-per night x $22-per-hour = $176—This is 40 hours, any additional hours are paid at the overtime rate
• 1 night x 8 hours-per night x $33 ($31 overtime rate + $2 shift differential)-per-hour = $264

TOTAL WAGE to be paid: $1,080

Takeaway: Calculating overtime is necessary but can be complex. If you have any questions, please reach out to Tracy Armstrong or any of our Employment Law attorneys.