What is Compensatory Time?

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Compensatory time, referred to as comp time, is paid time off given to a non-exempt employee instead of overtime pay.

Rather than paying employees time and a half in overtime pay, a company which has a comp time policy gives paid time off from work, for the equivalent amount of time to the extra hours worked. 

Review information on compensatory time, including who is eligible for comp time, comp time instead of overtime pay, and how many hours employees are eligible to receive.

Compensatory Time vs. Overtime Pay

In some cases, under agency flexible work schedule programs, compensatory time may be given in lieu of overtime pay. This paid time off may be approved for employees, both salaried and wage employees, who are required to work extra hours under more flexible schedules. 

Comp time must be paid at the same rate as overtime pay - one and one-half hours of compensatory time for each hour worked. Failure to compensate an employee with identical rates is a violation of the Fair Labor Standards Act (FLSA).

Comp Time for Exempt Employees

Under the Fair Labor Standards Act (FLSA) regulations, private sector employers can only give comp time if the time off is used in the same pay period the overtime occurred. The laws surrounding compensatory time vary between exempt and non-exempt employees. Employees are considered either exempt of non-exempt employees based on their job duties and responsibilities.

 

FLSA-exempt employees are required to use their compensatory time off after 26 pay periods, so it cannot be stored or rolled into the next year to be used at a later time.

Comp Time for Non-Exempt Employees

FLSA Non-exempt employees must be paid overtime pay, at one and a half times their usual rate of pay for any hours worked outside of the regular 40 hour work week.

Giving non-exempt employees the option to take compensatory time or extra paid time off is a violation of the law because non-exempt employees are legally required to be paid time and a half for any extra hours worked.

Government Employees

Individuals employed by the state or another governmental agency may be given compensatory time instead of overtime wages if there is a union agreement or a contract between the employer and the employee before the extra work begins. If paid time off is given to an employee, it must be offered at the same rate as overtime, one and a half times the extra hours worked.

Employment Laws

Although some employees may prefer to accept paid time off in lieu of overtime pay, employers should always review employment laws to stay compliant and avoid issues.

Also known as: compensatory time, comp time off, paid time off, compensation, 

Examples

  • Kristen was offered two days paid time off in lieu of her overtime pay for the week.
  • Matthew is ineligible to receive compensatory time because he is a non-exempt employee.
  • Jessi used her extra paid day off to visit her sister in Arizona for the weekend.
  • James was happy to receive overtime pay instead of compensatory time for the extra hours he worked that week.
  • Selma wondered if she would be able to cash out her compensatory time now that she was leaving the company.

Suggested Reading: Compensation and Salary Information