Everything You Need to Know About Comp Time

2024

Written by Asim Qureshi
By Asim Qureshi, CEO di Jibble

Hi, I’m Asim Qureshi, the CEO and co-founder of Jibble, a cloud-based time and attendance software. I have several years of experience in building and scaling software products and teams across various industries and markets. Before I founded Jibble, I worked as a VP at Morgan Stanley for six years. I’m passionate about helping businesses improve their productivity and performance through smart time management practices and sharing my insights on important topics related to employment.

Overview

Overtime happens in almost any industry.

And as an employer, managing it effectively is absolutely crucial. One option available to employers for compensating employees for their overtime work is offering compensatory time off, commonly referred to as comp time. While comp time can be a valuable tool for managing workforce costs and helping employees achieve a better work-life balance, you want to be sure you implement your comp time policy right.

This article will explore everything you need to know about comp time, including the eligibility criteria, how it works, and the legal guidelines surrounding its use. The more you know, the smoother your implementation of comp time will be, benefiting both your employees and your organization – win-win!

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Guide for comp time. Two male employees working on their computers. Photo by Tim van der Kuip on Unsplash

What is Comp Time?

Compensatory time off, more popularly known as “Comp Time”, is a form of compensation where employees receive time off instead of overtime pay for extra hours worked.

Comp time is typically used in public sector jobs and is regulated by labor laws such as the Fair Labor Standards Act (FLSA). It offers flexibility for employees to balance work and personal time, while also helping employers manage labor costs.

How Comp Time Works

Under the policy of comp time, instead of getting paid for overtime hours, employees accumulate equivalent time off, which they can use at a later date. 

Comp time is accrued at a 1.5:1 ratio, where 1 hour of overtime equals 1.5 hours of Comp Time.

Comp Time = Number of Overtime Hours Worked x 1.5

Employees must use their earned compensatory time off by the end of the 26th pay period following the pay period in which it was earned.

Is Comp Time Legal?

Comp Time is legal under specific conditions. According to the Fair Labor Standards Act (FLSA), comp time is primarily available to state and government agencies under certain conditions:

  • Agreement: There must be an agreement between the employer and employee before the extra hours are worked. This can also involve union representatives if applicable.
  • Rate: Comp Time must be accrued at a rate of time and a half. For example, if an employee works 10 hours of overtime, they are entitled to 15 hours of Comp Time.
  • Timing: Employees must receive Comp Time within the same pay period as the extra hours worked.

For private sector employees, comp time is generally not allowed under federal law, but there are exceptions in some states. For instance, Washington state permits comp time if the employee explicitly agrees to it.

Each state’s law on comp time is different, so it’s best to check state labor laws applicable to you and your employees.

Can Comp Time Be Made Mandatory?

Whether comp time can be made mandatory depends on the type of employee and the specific circumstances.

For exempt employees in government agencies, comp time can be required instead of overtime pay for irregular or occasional overtime work, but only if their basic pay rate is above the rate for GS-10, step 10.

However, for wage-earning employees or those eligible for overtime under the Fair Labor Standards Act (FLSA), comp time cannot be made mandatory. These employees must have the option to receive overtime pay instead of comp time.

Who Can Receive Comp Time?

Employees working in state or government agencies can choose to receive comp time in lieu of overtime pay.

It’s important to note though that an employee needs to be considered non-exempt under FLSA rules to be entitled to overtime pay and trade it in for comp time.

To be considered non-exempt under FLSA, an employee will need to meet the following criteria:

  • Receive below the minimum salary threshold of $35,568 per year. It’s important to note that this threshold is going to be increased to $43,888 on July 1, 2024, with more scheduled increases in the following years.
  • Have a primary job that doesn’t involve administrative, executive, and professional responsibilities.
  • Not mainly involved in selling products, getting service orders, or arranging contracts for facility use where the client pays a fee (as defined by the FLSA).

Employers can refer to the FLSA for more detailed information on the overtime eligibility criteria.

FLSA-exempt employees can still receive comp time under certain conditions. It should be part of a mutually agreed-upon arrangement between the employee and the employer. This agreement must also be established before the work is performed and should be documented in writing to ensure clarity and compliance.

How Much Comp Time Can Employees Accrue?

Employees can accrue a certain amount of comp time based on their job roles and responsibilities.

For most public sector employees, the maximum amount of comp time they can accumulate is 240 hours. However, there are exceptions for specific groups such as police officers, firefighters, emergency response personnel, and employees involved in seasonal activities. These individuals are allowed to accrue up to 480 hours of comp time.

It’s important to note that once these limits are reached, employees must be paid overtime wages for any additional overtime work performed. 

Does Accrued Comp Time Expire?

Accrued comp time needs to be used within a certain amount of time. If the employee does not use their comp time within the designated period, the employer must either pay it out as overtime pay or the comp time may be forfeited, depending on the specific policies and regulations in place.

According to federal guidelines, both FLSA-exempt and FLSA-nonexempt employees must use their accrued Comp Time within 26 pay periods (approximately one year) from when it was earned.

For FLSA non-exempt employees:

They must use their accrued Comp Time by the end of the 26th pay period after it was earned.

If they do not use it within this timeframe, or if they transfer to another agency or leave federal service, they must be paid for the unused Comp Time at the overtime rate in effect when it was earned.

For FLSA-exempt employees:

Similar to nonexempt employees, they need to use their Comp Time within 26 pay periods.

If they fail to use it within this period, or if they transfer or leave federal service, they may either receive payment for the unused Comp Time at the overtime rate when it was earned or forfeit it, unless the failure to use it was due to an exigency beyond their control. In such cases, they must be paid for the unused Comp Time.

What are the Penalties for Comp Time Violations?

Violating compensatory time regulations can result in severe penalties, as these rules are strictly enforced by the Department of Labor (DOL). Employers who willfully violate comp time rules can face fines of up to $10,000. Additionally, they may be required to pay back wages and liquidated damages to affected employees.

If an employee successfully prosecutes a lawsuit over comp time violations, the employer could also be liable for the employee’s legal fees. Repeat offenders are subject to even harsher penalties, including civil money penalties of up to $1,000 per infraction and the possibility of jail time.

Employers are also prohibited from retaliating or discriminating against employees who file complaints or report wage and hour violations. Any retaliation can lead to further fines and legal consequences.

Important Cautionary Note

This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.