Compensatory time means providing employees with additional paid time off for the extra work hours they complete in a pay period. It is a type of benefit for employees designed to help them achieve better work-life balance.

Granting comp time off comes with specific rules and limitations that employers must abide by to ensure that employees’ rights are upheld and protected.

If you’re keen to learn more about compensatory time and how to properly implement this type of benefit, then this article serves as your guide.

Key Takeaways

• Compensatory time is a type of employee benefit wherein paid time off is granted to employees for working overtime.
• Exempt employees and non-exempt employees working in the public sector are eligible for comp time. Non-exempt employees working in the private sector are not.
• Flex time is different from comp time because it pertains to offering flexible work hours to employees and seldom involves additional PTO.

What is Compensatory Time?

Compensatory time, or comp time, is the additional time off from work that employers grant their employees in place of overtime pay.

Comp time is offered as a type of employee benefit, wherein employees can use their accumulated compensatory time as paid time off (PTO) whenever they see fit.

Some may ask, Is there a difference between comp time vs. flex time? The answer is yes—flex time involves providing employees with leeway to adjust their work hours to address emergencies and other obligations outside of work.

Flex time does not involve accruing additional paid vacation days or time off of work.

How to Find Compensatory Time on Paystubs

Here’s a tip to find compensatory time on pay stubs:

Comp time on pay stubs is usually included under the Hours and Earnings column or section. Some companies may also use various pay stub abbreviations when referring to an employee’s compensatory time off.

These abbreviations include:

• Comp Time Earned Premium. It refers to the additional pay granted to employees in response to the extra work hours they rendered.
• Comp Time Earned Straight. The term describes the total number of compensatory hours that an employee has accumulated.
• Comp Time Used. It enumerates the amount of comp PTO used up by an employee.

It is crucial for the company’s payroll department to ensure that employee’s compensatory balances are reflected on their pay stubs. If an employee uses their comp time or collects additional extra hours, then the changes must also appear on their latest paycheck.

Is Compensatory Time Legal?

The legality of compensatory time depends on whether employers are granting paid time off to non-exempt or exempt employees.

According to the FLSA (Fair Labor Standards Act) regulations, non-exempt employees, or employees who are paid hourly wages, are entitled to overtime compensation.

Employees who earn $684 weekly and do not hold positions in the executive or administrative departments are also considered non-exempt.

When non-exempt employees exceed 40 work hours in a week, their employers must pay them at least 1.5x their regular pay rate for each work hour exceeded. Meanwhile, exempt employees are paid fixed salaries and are not entitled to overtime compensation.

Since non-exempt employees are entitled to overtime compensation, it would be illegal to grant them comp time for working extra hours.

Another key factor to consider is whether the company belongs to the public or private sector. The Department of Labor states that non-exempt employees working in the public sector, particularly those in the local and state agencies of the government, may qualify for comp time.

Comp Time vs. Overtime: What are the Differences?

When talking about comp time vs. overtime, it might be easy to confuse the two, so here are three key factors that will help you easily distinguish one from the other:

Eligibility

Eligibility for comp time depends on whether employees are paid salaries (exempt employees) or hourly wages (non-exempt employees).

The sector in which their employer belongs, that is, a private or public sector, also comes into play in determining whether an employee is qualified for compensatory time off.

Exempt employees are mostly eligible for compensatory time, and this is because they do not qualify for overtime compensation under the FLSA regulations.

However, offering compensatory time may not be as simple since most employers in the private sector are not that keen on implementing the said benefit unless their state or local labor laws strictly mandate it.

On the other hand, nonexempt or hourly employees are eligible for overtime pay but may not always qualify for comp time.

Nonexempt workers employed in public or government offices, however, might be eligible for compensatory time off.

Calculation

To calculate compensatory time, multiply the number of work hours an employee has exceeded in a 40-hour work week by 1.5. For instance, an employee worked an extra 8 hours apart from the regular 40 hours expected of her every week.

By multiplying 8 hours by 1.5, the employee earned 12 hours of comp time.

The formula for calculating overtime is as follows: nonexempt employee’s regular rate x 1.5 x number of overtime hours. Note that the formula may be modified or changed altogether across the different states.

Monitoring

Overtime pay and comp time are both reflected on employee pay stubs. However, the values may be represented differently.

Overtime pay is typically listed as the abbreviation OT and reflects the monetary compensation earned by the employee from their extra work hours. On the other hand, comp time often reflects the number of accrued compensatory hours.

Alternatively, employers may also list comp time as additional pay on their worker’s pay stubs and include the total compensatory hours used.

Comp Time for Exempt vs. Comp Time for Non-Exempt Employees

Comp time for salaried employees or exempt employees differs from compensatory time for non-exempt workers.

Exempt employees are paid a fixed salary. They are entitled to compensatory time but not overtime pay. More specifically, it is the employer's choice to grant overtime pay to their exempt employees.

Should an exempt or salaried employee resign before utilizing their remaining comp time, employers are not legally obliged to compensate the accrued comp hours.

Non-exempt employees are entitled to overtime pay and the minimum wage. When it comes to compensatory time, non-exempt workers in the private sector are prohibited from receiving comp time benefits.

The reason is that they are already qualified to receive overtime compensation for the additional hours they completed within a regular work week. However, there are exceptions for non-exempt employees in local and state government offices, which we will discuss further in the next section.

Comp Time in the Public Sector vs. Comp Time in the Private Sector

Implementing comp time in the public sector vs. in the private sector is not the same either. Compensatory time in the public sector sets limits on the number of hours that employees can accrue.

Specifically, employees in the public sector and government agencies are entitled to receive a compensatory time off rate of at least one and a half hours for every work hour exceeded.

The Department of Labor also specifies that police, firefighters, and employees hired for seasonal jobs are allowed comp time accrual of up to 480 hours. Non-emergency response personnel and other public sector workers can accumulate a maximum of 240 hours.

In the private sector, offering comp time to non-exempt employees is illegal because it violates the FLSA overtime regulations. But, for exempt employees who are eligible for comp time, their employers decide on the accrual limit for their compensatory time off.

Employers may also provide additional benefits related to paid time off in the form of vacation days, personal days, and sick leaves.

Penalties for Compensatory Time Laws Violation

The penalties for violating compensatory time laws vary depending on the severity of the violation.

Some of the most common compensatory time violations include the following:

• Discrimination. Unfortunately, some employers discriminate against employees based on their age, race, or sex and deny them compensatory time off.
• Unlawful termination. It is illegal to fire or terminate an employee for claiming comp time off. Regardless of whether the employee is legally entitled or not to comp time, they must not be laid off from work.
• Non-compliance. If an employer deliberately commits errors when it comes to complying with existing regulations on the limit of accruals, they may face legal consequences. Also, employers who offer comp time benefits must see to it that they calculate accumulated comp time correctly.

Employees whose employers have committed any of the violations described above may file a complaint with the Department of Labor’s Wage and Hour Division.

The employer will be placed under investigation, and if the complaints are proven to be true, then the complainant may be compensated for wages and granted time off.

Final Thoughts

Offering compensatory time off is not as simple as providing time off to employees for working extra hours. It also requires understanding the different regulations that govern compensatory time off and implementing a foolproof system to monitor all comp time accruals and balances.

Regularly generating pay stubs for your employees requires you to check all information related to their salary and benefits. Ultimately, this practice enables you and your employees to monitor compensatory time off and easily pinpoint and address any discrepancies.

Compensatory Time FAQ

#1. Do employers have to pay comp time?

Employers are not required to pay comp time, but it depends on the regulations implemented in their respective states. Some states allow private employers to provide comp time to their employees in place of overtime compensation.

#2. Who is eligible for comp time?

Exempt employees are eligible for comp time. Employers decide on the limit of comp hours that employees can accrue. Non-exempt employees working in the private sector are not eligible for compensatory time, but those working in government agencies and the public sector are.

#3. Can employers deny comp time?

Employersshould not deny compensatory time to their employees if they are eligible for the said benefit.

To avoid confusion, employers should adhere to FLSA and state regulations and underscore employee rights and preferences when creating policies for comp time.

#4. Does compensatory time roll over?

Yes, compensatory time will roll over for exempt employees, and they can use their compensatory time off within 26 periods upon receiving it.

Non-exempt employeesin the public sector must take their comp time within the pay period in which they received it; otherwise, their comp time will expire once the pay period ends.

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