Compensatory time off, or “comp time,” is often misused by employers who don’t understand Fair Labor Standards Act (FLSA) laws. As a very specific type of compensation, financial and HR professionals need to understand how comp time works. This comprehensive comp time guideline helps you understand the rules for salaried, exempt, and hourly employees and the possible consequences of poor compliance.
Compensatory time allows employers to provide employees paid time off to account for hours worked beyond their regular schedule. Comp time is commonly used as part of a regulated compensatory policy for flexible work scheduling but can also be used case-by-case to manage unexpected scheduled changes.
A comp day refers to a day an employee takes off when they have accumulated enough hours of overtime.
Travel comp time is compensatory time off for travel earned when an employee’s work requires work away from their daily workplace, and this work time is not compensated via other means.
Although both comp time and overtime compensate employees for extra hours worked, comp time is paid out in hours off, while overtime is paid in dollars. When an employee works over 40 hours in a week, they are entitled to either earn time and a half pay for every hour over 40 hours or time and a half in hours off.
However, not all employees qualify for comp time. Only exempt workers qualify, which in most cases are government or salaried employees. In fact, government employees are the only employees who can legally be offered comp time in lieu of overtime unless state laws allow otherwise.
According to the Code of Federal Regulations, Compensatory time off is “paid time off the job which is earned and accrued by an employee instead of immediate cash payment for employment in excess of the statutory hours for which overtime compensation is required by section 7 of the FLSA.”
The rules governing time off require government employers to provide comp time at a rate not less than one and one-half hours for each hour of employment for which overtime compensation is required in accordance with section 7. Furthermore, comp time, in lieu of paid overtime, is limited to a public agency that is a state, a political subdivision of a state, or an interstate governmental agency. It is illegal for private sector employees to use time off in lieu of pay.
Employers must adhere to the guidelines based on maximum accrual limits, documentation of hours and use, and deadlines to use comp time within a specified timeframe. For example, limits on the total number of comp hours an employee can accrue is 240 for most salaried workers or 480 hours for workers such as firefighters and law enforcement officers. This adds further restrictions to comp hours as the 480-hour limit on accrued compensatory time can’t represent more than 320 hours of actual overtime worked, and the 240-hour limit represents not more than 160 hours.
Nonexempt employees are hourly workers entitled to receive overtime when they work over 40 hours in a week in accordance with the FLSA. In this case, it is illegal to offer private employees comp time. Exempt employees are salaried employees who are ineligible for overtime pay or comp time. This is because their salary is intended to cover extra work expected in typical salaried roles. However, although not required by law, as an employer, you have the right to offer time off to salaried workers as a reward for their hard work.
The U.S. Department of Labor (DOL) does not allow comp time for nonexempt employees in private-sector employment. Comp time is limited to public agencies at both state and local levels. However, as mentioned, private-sector employers can offer time off as a reward for salaried employees. In this case, it is important to avoid using the term “compensatory time,” as this is a legal term used specifically in the public sector. Many companies adopt terms such as flex time or personal days to identify this form of compensation.
Despite the above information, some states allow private sector comp time for salaried employees in lieu of overtime as long as the employee agrees. However, this can open employers up to possible lawsuits should an employee leave the company, be fired, or change their minds and expect to be compensated with extra pay. Because of this, it is imperative to understand state laws such as:
Some possible consequences of comp time violations include:
If your state allows comp time, it is essential to develop a policy and ensure you adhere to state laws. This might include the following:
Applying comp time legally is easier when you have software to create a streamlined onboarding process to share company policies and track hours and overtime accurately. This ensures your comp time policies remain transparent and that hours are tracked to ensure employees receive the hours and compensation they are entitled to.
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