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Compensatory time vs. overtime

Who is eligible for compensatory time off?

Exempt vs. nonexempt employees - what’s the difference?

How does compensatory time off work?

Compensatory time FAQs

What is compensatory time off

Compensatory time, or comp time for short, is when employers compensate their employees for overtime hours with time off instead of overtime pay.

Compensatory time off is the terminology most commonly used in the US and enforced by the Department of Labor’s Fair Labor Standards Act.

Compensatory time vs. overtime

Compensatory time off is paid leave to make up for extra time employees work over forty hours in one work week. Overtime is cash payments for overtime hours worked over 40 hours. 

Who is eligible for compensatory time off?

A worker may be eligible for comp time depending on the following factors: 

  • Federal and state laws
  • Whether an employee is considered nonexempt or exempt from overtime
  • Whether the employee is a public-sector or private-sector employee 

Comp time for nonexempt employees**: Employers of** FLSA-covered nonexempt employees working for private employers must pay overtime at one and a half times the employees usual pay rate for any hours worked outside the regular 40-hour workweek. 

If an employer gives nonexempt employees the option to take compensatory time off they violate federal law. Nonexempt employees are legally required to be paid time and a half for any extra hours worked. However, state laws may vary.

Comp time for exempt employees: Under FLSA regulations, private sector employers can design their own compensatory time policies for exempt employees. However, employers are not obligated to provide comp time to exempt employees because they are not entitled to overtime pay.

Comp time for government employees**:** Under certain conditions, employees of federal, state, or local government agencies should receive compensatory time off at a rate of one and a half hours for each extra hour worked instead of overtime pay.

Fire protection, law enforcement, 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. 

Exempt vs. nonexempt employees - what’s the difference?

Employees are considered either exempt or nonexempt based on their earnings:

  • Nonexempt employees**:** Those in nonexempt positions are usually paid an hourly wage or earn a salary that’s less than $684 per week or $35,568 annually. Employers must pay these employees the minimum wage and overtime if they work over 40 hours in a work week.
  • Exempt employees: Those in exempt positions typically earn a salary of at least $684 per week or $35,568 annually and are not required to be paid overtime.

How does compensatory time off work?

Employers must pay comp time at the same rate as overtime pay: one and a half hours of compensatory time for each hour worked. Failure to compensate an employee with the same rates violates the Fair Labor Standards Act (FLSA).

If an employee works over a 40-hour week, the employer can track this extra time and provide the employee with PTO to make up for each hour of overtime work.

For every hour of overtime, the employee can take an hour and a half of compensatory time off at their regular rate of pay. This approach ensures the same value of benefits had the employee received time and a half overtime compensation.

For instance, if an employee works 45 hours instead of 40, they are entitled to time and a half pay for the five extra hours or 7.5 hours of compensatory time off. The value of the time off is equal to the cash benefit accrued for working overtime.

Compensatory time FAQs

How do you track compensatory time off**?**

Employers must keep a tracking sheet of work hours, including extra time eligible for compensatory time off. An employer will calculate each worker’s extra hours for a particular period. The value of their time off equals the money they would have earned outright for working overtime.

How can workers use compensatory time off**?** 

Some states have laws regulating when and how compensatory time can be used and allow employers to give employees comp time. Check with the state department of labor in your location for guidelines on what applies to your situation.

How do you calculate compensatory time?

Employers calculate the appropriate amount of comp time by subtracting 40 from the total number of hours worked and multiplying the difference by 1.5.

The overtime rate must equal 1.5 times the employee’s hourly rate.

Can compensatory time be paid out?

No. Employers give comp time in place of overtime benefits. Employees cannot redeem the comp time in cash. However, employees may be able to transfer their unused compensatory time if they move to a different government department. Employees may also redeem the comp time in cash if the employer discharges them from employment.

Does compensatory time rollover?

Comp time does not roll over. Employees must take their accrued compensatory time off before the end of the specified pay period.

How do employees request compensatory time off**?** 

The employee must request the use of compensatory time off in lieu of overtime pay in writing.

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