What is compensatory time off?

Compensatory time off is paid time off that employees can accrue in return for working overtime. Instead of compensating employees time and a half for their overtime hours, compensatory time off provides time off plus pay. Not all employees, however, can qualify for compensatory time off, or, as it’s commonly known, comp time. These factors determine who can receive compensatory time off:

• Federal and state laws
• Public or private sector employers
• Status as an exempt or non-exempt employee

The Fair Labor Standards Act (FLSA) defines the difference between exempt and non-exempt employees. It is the character and content of the work, not the job title, that ultimately determines whether an employer classifies an employee as exempt or non-exempt.

Exempt employees earn a salary instead of an hourly wage and typically work in high-level, managerial, specialized positions. For example, doctors, lawyers, accountants, HR managers, and engineers qualify as exempt. Exempt employees are exempt from overtime pay. 

Non-exempt employees, on the other hand, generally perform simpler types of work, earn hourly wages, and according to the FLSA, must receive overtime pay for working over 40 hours a week. Clerks, cashiers, and bookkeepers, for instance, are non-exempt.

Why should HR leaders care about compensatory time off?

Companies that reward employees with appropriate overtime compensation exemplify integrity, helping them bridge a healthy employer-employee relationship.

Moreover, understanding the comp time rules safeguards companies against illegal practices, while protecting employee rights. Unfortunately, 30% of private sector businesses unlawfully use comp time for non-exempt employees. Violating the FLSA could result in a lawsuit and owing thousands of dollars in damages. 

What can HR leaders do to successfully incorporate compensatory time off?

HR leaders can navigate through the complex compensatory time off laws by incorporating these practices:

• Learn the rules.  A thorough understanding of the labor laws and their exceptions helps HR managers confidently reward employees according to the law. Because the FLSA is so intricate, with technicalities and occasional updates, HR leaders must know enough to realize if or when to consult a comp law professional.
• Inform managers. Knowing the rules also enables HR leaders to educate managers on the compensatory time off regulations. The managers who directly oversee employees must be familiar with the overtime laws to ensure that employees receive the correct types of payment. 
• Educate employees. HR professionals should explain to employees the specific regulations involved in overtime and comp time payment before they ever work overtime. Each employee should have access to the information that identifies them as exempt or non-exempt; simplifying comp time information for employees empowers them to understand their rights.  

How can effective implementation of compensatory time off improve company culture?

Applying comp time correctly shows a company’s integrity and contributes to their credibility. This transparency, in turn, nurtures the employee-employer relationship, setting a foundation for a thriving company culture comprised of motivated and engaged employees.