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Paying Shift Allowance? Rules for Employers

Employees have a number of well-established rights around pay in the UK, from being paid a minimum wage to not having unlawful deductions made from their wages. However, when it comes to shift allowances, employers are not always as confident about what they can and cannot pay an employee, and whether the employee is automatically entitled to a higher rate.

The following guide for employers looks at the rules on shift allowances, including night shift allowances, in the context of different working patterns. We also look at the minimum pay an employee must be paid, plus the maximum hours they are legally allowed to work and what rest breaks they must take when working shifts.

 

What is a shift allowance?

A shift allowance is a discretionary payment or financial incentive that many employers choose to pay their employees to work irregular shifts or unsociable hours, although the rates of pay for shift allowances can vary between organisations and industry sectors.

In addition to essential 24-hour services, such as healthcare services, there are thousands of UK businesses that require 24/7 staffing to keep up with continuous production demands or meet round-the-clock customer service requirements. This means that the need for staff to work earlier, lates or nights, or to work extended or double shifts, is not uncommon in the UK.

When employees are working irregular or unsociable hours, they may be offered or already contractually entitled to a certain shift allowance, where this is often rolled into the overall pay rate as a benefit of working shifts. By paying employees an enhanced rate, in recognition of the disruption that shift work can have on an employee’s personal and family life, this can be an effective way for employers to reward staff for working non-regular hours.

 

Different types of shift allowance

A shift allowance can be calculated in a number of different ways, although any sort of shift working will usually come at a financial cost to the employer. Typically, the size of the shift allowance will be linked to the relative inconvenience of a particular shift pattern, including the time and length of the shift, and whether weekend or night work is involved.

In some cases, a shift allowance may be calculated by the employer as a percentage uplift, for example, from anything between 5-20% on top of the usual basic rate of pay offered by the business. In other cases, the shift allowance may be calculated as time and a half or double time. It could even be a flat fee paid on top of the employee’s standard pay.

 

Different types of shift patterns

In the UK, a regular shift will usually be for around 8 hours a day, Monday to Friday 9-to-5, or with some slight variations to this traditional working model. However, there are several other established shift patterns, for which shift allowances will commonly be used to compensate employees for working irregular or unsociable hours.

When referring to ‘irregular or unsociable hours’, these are generally considered to be any shift, or part of a shift, that falls outside of a typical working day for the organisation in question. These types of non-standard or irregular shifts can vary in length from between 8 to 12 hours, with a range of working patterns and shift rotations to ensure that staff are available, when required, depending on the nature and needs of the business.

Some of the most established shift patterns to which shift allowances will apply, include:

 

Two-shift system

This is perhaps the most frequently worked UK shift pattern, rotating two members or teams of staff. This will involve an early and a late shift, comprising two successive 8-hour shifts, usually 6am to 2pm followed by 2pm to 10pm, with one person or team working earlies and the other rostered on to work lates.

 

Three-shift system

This system adds a night shift to the two-shift pattern above, giving the business three rotating 8-hour shifts to provide 24-hour cover, where needed. These shifts usually run from 6am to 2pm, 2pm to 10pm and 10pm to 6am.

 

Night shift working

Night shifts are typically from 10pm to 6am, Monday to Friday, where some employees will work nights as part of a three-shift working arrangement, while others will work permanent nights without any rotation into days. When used in isolation, 4 x 12-hour night shifts are commonplace, together with four nights off in a row. These are often described as 4-on 4-off shifts, a model which can be used equally for daytime shifts. This can also be changed to a 4-on and 3-off approach, with less rest days taken in between.

 

Weekend shifts

These are shifts taking place over a Saturday and Sunday, or even over three days, including Fridays. This shift pattern usually uses 12-hour shifts, possibly rotating between days and nights on alternate weeks where night shifts apply. When used together with a three-shift pattern, the employer can again achieve 24/7 cover this way.

 

The law on shift patterns & pay

No matter the nature of the shift pattern in question, when it comes to what an employee should be paid for working irregular or unsociable hours, this is entirely down to the employer’s discretion. This means that an enhanced rate of pay for working non-regular shift patterns is not a strict legal requirement. However, enhanced pay does represent an effective means of attracting and retaining staff who are prepared to work these hours, in this way securing the appropriate level of cover needed for the employer to run their business.

The rates of pay, the shift patterns required and the hours to which any shift allowance relates will usually be agreed from the outset within an employee’s contract of employment. In some cases, shift patterns and shift allowance rates may be the subject of pre-employment negotiations, although many employers will already have clear practices in place when it comes to hours and rates, recruiting staff on a customary and pre-agreed basis.

The net effect is that where a provision for a shift allowance is detailed in the employment contract, and an employee agrees to work the irregular or unsociable hours as defined under that contract, they will be entitled to receive that enhanced level of pay for those hours.

An employer cannot force an employee to change their shift patterns if the contract of employment does not provide for this. For example, if the contract only stipulates daytime hours, the employer would need the employee’s agreement to change to night time working. However, where a different shift pattern becomes necessary to meet the needs of the business, this is where shift allowances can be used to incentivise staff to agree to work varied hours.

When deciding on an appropriate shift allowance and shift pattern, employers must ensure that any rates of pay and hours worked do not take the employee below the national minimum wage, above the maximum weekly working limit, where applicable, or breach the rules when it comes to rest breaks. However, outside of the rules relating to minimum wage and working hours, employers can decide what rates of pay and shift patterns that they offer to staff.

 

The law on shift allowance & minimum wage

The law is strict when it comes to the minimum amount that employees must be paid. Under the National Minimum Wage Regulations 2015 (as amended), employers are legally required to pay all employees the national minimum wage (NMW), calculated based on the individual’s age. For the tax year 2022/23, the NMW rates are as follows:

  • £9.50 for employees aged 23 and over
  • £9.18 for employees aged 21 to 22
  • £6.83 for employees aged 18 to 20
  • £4.81 for employees aged under 18 and apprentices

Given that a shift allowance is an enhanced rate designed to incentivise staff to work non-regular hours, employers must ensure that this is greater than the rate for regular hours, to which the NMW thresholds also apply. It is also important to keep abreast of any increases, as NMW rates change on 1 April each year, in this way ensuring that staff are paid at least the statutory minimum for regular hours, with a suitable uplift for any shift allowance.

 

The law on shift patterns & maximum hours

The law is also strict when it comes to the maximum number of hours that employees can work and what rest breaks they must be allowed. Under the Working Time Regulations 1998, employees cannot work more than 48 hours a week on average, typically calculated over a 17-week reference period, unless the employee has opted out of a 48-hour week in writing. An employee should also not be allowed to work more than an average of 8 hours on a night shift in any 24-hour period, again typically calculated over a period of 17 weeks.

All employees, regardless of when they work, will be entitled to one uninterrupted 20 minute rest break during any shift of more than 6 hours, 11 hours rest between shifts, and either one uninterrupted period of 24 hours each week without any work or 48 hours each fortnight.

Workers under 18 cannot work more than 8 hours a day or 40 hours a week, or usually at night between the hours of 10pm and 6am. They must also have a minimum 30-minute rest break if their shift is longer than 4.5 hours, daily rest of 12 hours and weekly rest of 48 hours.

However, outside of the rules relating to maximum working hours and rest breaks, and when younger workers can and cannot work, it is at the employer’s discretion as to what working pattern and hours will be required of staff. Having decided what shift patterns will be best for the business, the employer can then decide a suitable shift allowance based on that pattern.

 

What is a night shift allowance?

A night shift allowance is the enhanced rate that an employer can choose to pay an employee for working night time hours. This is usually a shift that falls between the hours of 11pm and 6am, unless the employer and employee agree to a different timeframe in writing. For the purposes of the Working Time Regulations, if agreement is reached for a different night time shift, this must be at least seven hours long and include the times between midnight and 5am.

However, regardless of the hours worked during the night, under the NMW Regulations, there is no statutory entitlement to a higher night working rate. As with all shift allowance rates, a night shift allowance is at the discretion of the employer, but will usually be relative to the inconvenience of a particular shift pattern to be able to sufficiently incentivise staff.

Working night shifts can really take its toll on employees, resulting in disrupted sleep patterns and impacting mental wellbeing, not to mention the disruption to their lives outside work. This means that even though there is no strict legal requirement for employers to pay a special night shift allowance, this type of work will usually attract the highest levels of enhanced pay. Where night working forms part of a 4-on 4-off shift pattern, the consecutive number of weekends that can be affected by this pattern can also equate to a higher allowance.

However, night shift allowances and enhanced rates of pay are not commonplace in all industry sectors, where many shift workers still only receive the bare minimum despite their challenging work schedule. For example, in cases where the employee is expected to sleep during their night shift and and is only required to respond to emergencies, such as in care work, many employers will choose not to offer a higher rate. The employee may not even be paid minimum wage for their whole shift, at least not for the times when they are asleep.

As the law stands, workers who are provided with suitable sleeping facilities are only entitled to minimum wage for the periods when they are awake for the purposes of working and not simply available for work by being on the premises. Still, employers must be cautious not to fall foul of the law here, as employees expected to work for most of their night shift must still get paid minimum wage for their whole shift, even if permitted to nap between tasks.

 

Need assistance?

DavidsonMorris’ HR specialists provide expert guidance to employers on all aspects of pay and reward. Working closely with our employment lawyers, we offer holistic advice to support positive working relations while ensuring compliance with your legal obligations in relation to employee entitlements and protecting your commercial interests. For specialist advice, contact us.

 

Shift allowance FAQs

How is shift allowance calculated?

A shift allowance can be calculated in several different ways, depending on the organisation and industry sector. It could be based on a percentage increase to the usual basic rate of pay, or time and a half or double time.

When should you get a shift allowance?

Employers are not legally obligated in the UK to pay their employees a specific shift allowance although, by way of financial incentive, many employers will offer their staff an enhanced rate of pay to work irregular or unsociable hours.

Is there any shift allowance?

Whether a shift allowance applies when working irregular or unsociable hours, for example, nights or weekends, will depend on the terms of the employee’s contract. There is no automatic right to an enhanced rate of pay for working shifts.

Last updated: 11 July 2022

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