What is Comp Time at Work? Definition, Legal Rules, and How it Differs from Overtime

Comp time lets employers offer time off instead of overtime pay, but strict legal rules often limit its use. This guide explains comp time, how it differs from overtime, and the legal risks businesses must review.

By Brad Nakase, Attorney

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Table of Contents

1. Introduction

2. What is Comp Time at work?

3. Exempt Employees

4. Non-Exempt Employees

5. Overtime vs. Comp Time

6. Repercussions for Breaking Comp Time Regulations

Introduction

Because this distinctive way of paying overtime is not very prevalent, owners and managers often ask, “What is Comp Time at work?” It might even be against the law in some situations.

In this post, we will respond to the above query and go over all the information you require to decide whether or not to implement it in your company.

What is Comp Time at work?

Compensatory time and, less frequently, compensation time are two of the many names for comp time. Any term you read, hear, or use ultimately refers to the same idea.

The practice of offering “payment” for working overtime in the shape of time off rather than overtime compensation is known as compensation time.

As an illustration, suppose you have a worker who puts in 48 hours per week.

You offer the employee 8 hours off in a different week as payment for the extra they put in, rather than giving time-and-a-half, which is the standard overtime rate, for the 8 hours over the normal forty.

As we stated at the start, it might be against the law for your company (either at the state, federal, or both levels), and you might be exposing yourself to severe fines and the potential for costly legal action.

It is important to research the laws & statutes that concern this type of compensation and how they work with your company before adding this type of compensation to your payroll system. It can be summed up as a matter of two elements, in general.

The type of your business (private, public, or government)

How each employee is categorized (exempt versus non-exempt)

In the following two parts, we will talk about the second variable.

Exempt Employees

In accordance with the Fair Labor Standards Act (FLSA), a federal set of regulations, an employee in a private company is considered exempt if they fulfill the following requirements:

Paid a salary rather than an hourly rate.
Earns a minimum of $35,568 per year
Possesses greater responsibility than other people (manager, deputy manager, etc.).

Overtime is not available to exempt employees. However, they are eligible for comp time.

Comp time serves as a kind of “payment” for any hours that exempt employees work over the standard full-time timetable because they are paid on a salary basis, meaning their annual remuneration is predetermined.

Having said that, your company is free to decide whether or not to provide compensatory time to exempt workers. It is entirely up to the company if they choose to provide comp time.

Those who do include it in their compensation plan often consider it as a kind of ancillary perk that they may utilize to draw in high-potential staff members and keep top performers on their staff for longer.

Non-Exempt Employees

A private company’s non-exempt employee is defined by the Fair Labor Standards Act as one who satisfies the following requirements:

Hourly wages or, in rare cases, salary
Not less than the federal minimum wage is earned.
Bears fewer responsibilities than others (such as food runners, baristas, etc.).

Comp time is not available to non-exempt workers, but they are eligible for overtime.

The federal government sees comp time as a mechanism for companies to avoid paying hourly workers overtime for the hours that they put in over their typical part-time plan because non-exempt employees are often paid on an hourly basis.

Comp time is essentially seen by the federal government as a means for companies to exploit hourly workers and evade paying extra overtime wages. As a result, they have made it unlawful to provide comp time to non-exempt employees.

Once more, consult a lawyer about whether or not comp time applies to your company before thinking about including this type of remuneration in your payroll system.

Overtime vs. Comp Time

Many managers continue to wonder, “What is Comp Time at work versus Overtime?” even after hearing about it, and “What is the payroll comparison between the two?”

To address both of those queries, consider the following example.

1. Working overtime

Assume you have a worker who puts in 48 hours each week (as discussed earlier in the article).

You would give the worker their regular salary, such as $10 per hour, for forty of those hours. However, you would be paying the worker more for the remaining eight hours.

In most cases, that higher pay is time-and-a-half, or 15 dollars an hour in this case. Therefore, 40 hours at 10 hours (400) and 8 hours at 15 dollars (120) would form the weekly wage of the employee, which would be $520.

Even though it does not sound like a big deal at first, you would have to pay the employee an extra 5760 dollars per year, assuming they consistently worked eight hours of overtime every week.

You may see how the expense of overtime pay quickly adds up and impacts your bottom line by multiplying that by the total number of people on your team.

2. Explained: What is Comp Time at Work?

By offering employees time off rather than compensation, companies may avoid the high expense of overtime labor, which is the reason why comp time is so alluring.

Therefore, you could offer your employee an eight-hour day off the following Wednesday and only compensate them for the forty regular hours they performed if they put in 48 hours in a week with comp time.

You understand how your employment cost budget would be significantly impacted by this.

You may use the money you will save in working with comp time to build inventory, enhance your business, or customer base. Just remember, though, that comp time is illegal at many times, and it could put your company through legal and financial troubles.

Repercussions for Breaking Comp Time Regulations

Whether you intentionally or inadvertently broke the FLSA, the penalties for breaking comp time requirements can be very severe.

These sanctions consist of:

Willful infractions can result in fines of up to $10,000.
Back pay and liquidated damages (double the amount of unpaid wages) must be paid.
Employee attorney fee reimbursement in the event that a lawsuit is won
Recidivists face a threat of being jailed and penalized (as much as $1000) for a committed offense.
Enhanced punishment to curb discrimination & punitive retaliation against employees who report wage and hour violations or who file complaints.

Ignoring the federal, state, and municipal comp time obligations can easily cause issues. It is even against the law to dispatch an item that is manufactured by your company, thereby violating state laws.

Before implementing compensatory time in your company, make sure to consult a lawyer to avoid any problems.

However, through the implementation of a scheduling software within your business process, you will be able to reduce the expenses and the troubles with issuing comp time as well as repercussions linked to overtime. The friendly user interface enables users to see the number of hours each of the team members is to work each week and invites their attention to the overlapping, book twins, or overtime.

If you were thinking, “What is Comp Time at work?” I hope this article answered most of your doubts.

Comp time in the United States is a subject that never feels fully settled. For government jobs, the practice is fairly well-defined. It gives workers in those jobs some extra freedom, and many see it as a useful way to handle family or personal situations.

For people in the private sector, it’s a different story. Federal law generally expects employers to pay overtime in cash, not with time off. Even if both sides agree, it usually doesn’t fit under the Fair Labor Standards Act. That makes things tricky, because many workers might prefer an extra day off instead of a few extra dollars, but the law leans toward pay to avoid abuse.

That doesn’t mean employees and companies have no room to work with. Many businesses try to build flexibility into schedules in other ways, like remote options, flexible hours, or extra paid leave. These may not carry the official name of “comp time,” but they do give workers something similar.

In the end, comp time is really about balance. Employees want control over their schedules, and employers want to stay within the law.

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What is Comp Time at Work? Definition, Legal Rules, and How it Differs from Overtime

Introduction

What is Comp Time at work?

Exempt Employees

Non-Exempt Employees

Overtime vs. Comp Time

Repercussions for Breaking Comp Time Regulations

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