Differential pay is a financial term that refers to extra money earned by an employee for working a certain shift. Employees often receive extra compensation for working "off" shifts, such as night shift or third shift. Being able to calculate differential pay is important for a business and for employees who want to estimate how much they may earn for working certain hours.
Note the hourly pay earned by an employee for working a regular shift.
Find out the percentage of regular pay that is earned for working an off shift. For example, the worker may earn 10 percent of her regular, hourly wage in addition to that wage.
Multiply the percentage by the hourly wage to figure out differential pay. For example, if a worker earns $20 an hour, and the differential for the night shift is 10 percent: 20 x 0.10 = 2 Therefore, the differential pay would be $2 per hour.
Add the differential pay to the hourly wage to find out the total earned each hour during the off shift. For example, a person earning $20 an hour with differential pay of $2 per hour would make a total of $22 per hour during this shift.
