An Overview of Compensatory Time

Time Is Money

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Compensatory time, referred to as comp time, is paid time off given to a non-exempt employee instead of overtime pay. Rather than paying employees time and a half in overtime pay, a company which has a comp time policy gives paid time off from work, for the equivalent amount of time to the extra hours worked. 

Review information on compensatory time, including who is eligible for comp time, comp time instead of overtime pay, and how many hours employees are eligible to receive.

Compensatory Time vs. Overtime Pay

In some cases, under agency flexible work schedule programs, compensatory time may be given in lieu of overtime pay. This paid time off may be approved for employees, both salaried and wage employees, who are required to work extra hours under more flexible schedules. 

Comp time must be paid at the same rate as overtime pay - one and one-half hours of compensatory time for each hour worked. Failure to compensate an employee with identical rates is a violation of the Fair Labor Standards Act (FLSA).

Comp Time for Exempt Employees

Under the Fair Labor Standards Act (FLSA) regulations, private sector employers can only give comp time if the time off is used in the same pay period the overtime occurred. The laws surrounding compensatory time vary between exempt and non-exempt employees. Employees are considered either exempt or non-exempt employees based on their job duties and responsibilities.

FLSA-exempt employees are required to use their compensatory time off after 26 pay periods, so it cannot be stored or rolled into the next year to be used at a later time.

Comp Time for Non-Exempt Employees

FLSA Non-exempt employees working for private employers must be paid overtime pay, at one and a half times their usual rate of pay for any hours worked outside of the regular 40 hour work week.

Giving non-exempt employees the option to take compensatory time or extra paid time off is a violation of the law because non-exempt employees are legally required to be paid time and a half for any extra hours worked.

Government Employees

According to the Department of Labor, under certain prescribed conditions, employees of State or local government agencies may receive compensatory time off, at a rate of not less than one and one-half hours for each overtime hour worked, instead of cash overtime pay. Law enforcement, fire protection, and emergency response personnel and employees engaged in seasonal activities may accrue up to 480 hours of comp time; all other state and local government employees may accrue up to 240 hours. An employee must be permitted to use compensatory time on the date requested unless doing so would “unduly disrupt” the operations of the agency.

Employment Laws

Although some employees may prefer to accept paid time off in lieu of overtime pay, employers should always review employment laws to stay compliant and avoid issues.

Here are examples:

  • Kristen was offered three days paid time off in lieu of her overtime pay for the week for two overtime days.
  • Matthew is ineligible to receive compensatory time because he is a non-exempt employee working for a private sector company. He must be paid for overtime.
  • Jessi used her three extra paid day off to visit her sister in Arizona for the weekend.
  • James was happy to receive overtime pay instead of compensatory time for the extra hours he worked that week.
  • Selma wondered if she would be able to cash out her compensatory time now that she was leaving the company.