Peak time pay is used in businesses that have extended periods of operation, but that are only busy during peak, or rush times. Again the restaurant industry can be examined. Here the hours of operation may be from 6 am to 1 am. While there are 19 hours that the business is open, they probably are only really busy during three rush period, the breakfast rush, the lunch rush, and the dinner rush. In order to meet the customer service needs during these rush periods more employees are scheduled to be working, however during the slow periods the staff is reduced to a minimum. This reduces the total operating costs for the day.
However, this means that some employees are only working for three hours a day. If these people were only making minimum wage, this job really wouldn’t be paying them enough to entice them to stay with the company, so in order to entice these people to stay, the business owner offers to pay these peak time employees a higher wage than the regular employee. This way they make a reasonable per day wage, but the total labor cost effect on the business is still less than having a minimum wage worker work an eight hour shift.
The advantages of this system are that it reduces employee turnover for peak time shift, and it reduces the cost of labor is the long run.
The disadvantages of this scheduling option are mostly for the employee. Peak time pay employees only are scheduled for three hours a day, however, the three hours are in the middle of other normal shifts so it makes it difficult to schedule other jobs around this type of work schedule. Also, even though peak time pay employees are making more than minimum age, this may still not be enough to meet their financial needs, and they will most likely need to work two or three jobs to meet their financial needs adding to their fatigue and dissatisfaction with their job.