Shift allowance compensates employees for working outside standard daytime hours, night shifts, rotating shifts, or otherwise inconvenient timing. Unlike overtime pay, there’s no fixed statutory rate behind it; it’s set by company policy, though the underlying obligation to compensate night-shift work in some form traces back to labour law.

How companies typically structure it

Two common approaches. A percentage of basic salary, commonly 10-15% for general night-shift work, running higher, 15-25%, in IT and BPO roles where night shifts are routine rather than occasional. Or a flat per-shift amount, typically ₹100 to ₹500, sometimes up to ₹1,000 for senior or specialised roles, which is the more common structure in IT and BPO specifically since it’s simpler to administer across large shift-based teams.

Shift allowance is fully taxable as salary income; it carries no special exemption.

Frequently asked questions

Is shift allowance legally mandatory?

There’s no single fixed statutory rate, but labour law has generally required some form of compensation or protection for night-shift work, leaving the specific amount to company policy and, in some cases, state-level rules.

Does shift allowance count toward PF calculations?

Typically no, since it’s usually structured as a variable, shift-dependent allowance rather than a fixed monthly component, similar to how most allowances outside basic and DA are treated.

Do rotating-shift employees get a different rate than permanent night-shift employees?

Often yes. Some companies pay a lower rate for occasional rotation into night shifts and a higher rate for employees permanently assigned to them, though this varies by company.

Calculate a shift allowance payout with the Shift Allowance Calculator.