Shift Allowance
Additional payment given to employees working in night shifts or rotating shifts.
Shift Allowance is an additional payment made to workers who work during non-standard hours, particularly night shifts, rotating shifts, or weekend shifts. This compensates for the inconvenience and health impacts of working outside normal daytime hours. In Indian manufacturing, shift allowance is an essential component of the compensation structure for factories operating multiple shifts.
Why Shift Allowance Matters
Working non-standard hours disrupts natural sleep cycles, affects family life, and can have health implications over time. Shift allowance serves as compensation for these inconveniences and helps factories attract workers willing to work evening or night shifts. Without adequate shift allowance, factories often struggle to staff night shifts adequately.
Common Shift Allowance Structures
1. Percentage-Based Allowance
- General Shift (Morning 6 AM - 2 PM): No allowance (base rate)
- Second Shift (2 PM - 10 PM): 10-15% additional allowance
- Night Shift (10 PM - 6 AM): 20-30% additional allowance
2. Fixed Amount per Shift
- Day Shift: ₹0 additional
- Evening Shift: ₹50-100 per shift
- Night Shift: ₹100-200 per shift
3. Combined with Other Allowances
Some factories combine shift allowance with transportation allowance, meal allowance, or night duty allowance. For example, night shift workers might receive ₹150 shift allowance + ₹50 meal allowance + ₹75 transport allowance = ₹275 total additional per shift.
Real Factory Example
Scenario: Mumbai auto parts manufacturer runs three 8-hour shifts
Worker Basic Salary: ₹15,000 per month
Day Shift Workers: No additional allowance
Evening Shift Workers: ₹75 per shift × 26 days = ₹1,950 per month
Night Shift Workers: ₹150 per shift × 26 days = ₹3,900 per month
A night shift worker thus earns ₹18,900 total (₹15,000 basic + ₹3,900 shift allowance), making it financially attractive despite the inconvenience.
Shift Allowance vs Overtime vs Night Duty Allowance
Shift Allowance: Paid for working non-standard hours (evening/night) regardless of whether total hours exceed standard working hours.
Overtime: Paid when worker exceeds maximum daily/weekly hours (typically paid at 2x rate).
Night Duty Allowance: Specific to night hours (typically 10 PM to 6 AM), often mandated by Factories Act.
These can be combined. For example, a worker on night shift working overtime would receive: Base Pay + Night Shift Allowance + Overtime Pay (at 2x rate for extra hours).
Legal Requirements
While the Factories Act mandates overtime pay for excess hours and weekly rest days, shift allowance itself is not legally mandated. However, many state-level labor agreements, industry wage boards, and union contracts specify minimum shift allowances that employers must provide.
Impact on Production Costs
Shift allowances typically add 5-15% to labor costs but enable factories to run multiple shifts and maximize machine utilization. A ₹50 lakh CNC machine produces more value when running 16-24 hours per day versus just 8 hours, making shift allowances a worthwhile investment for capital-intensive operations.
Best Practices for Shift Management
- Rotate Shifts Fairly: Don't permanently assign anyone to night shift; rotate every 2-4 weeks
- Provide Adequate Breaks: Night shift workers need more frequent breaks due to fatigue
- Health Monitoring: Regular health checkups for workers on rotating shifts
- Transportation Support: Arrange transport for night shift workers, especially female employees
- Canteen Facilities: Ensure hot meals available for night shift workers
How ERP Systems Handle Shift Allowances
Modern manufacturing ERP systems like Karygar automatically track shift assignments from attendance data and calculate appropriate allowances. The system applies the correct allowance rate based on shift timing, generates payroll with all components clearly itemized, and produces compliance reports for labor department inspections.
See Shift Allowance in Action
Don't just read about Shift Allowance. See how Karygar automates this process to reduce manual work and errors on your factory floor.