Time management
PTO payout: All you need to know
Learn about PTO payout, its benefits for employees and employers, and how to create a compliant and effective PTO payout policy for your organization.
Learn about compensatory leave, its benefits, and how to manage it effectively within your organization to ensure compliance and employee satisfaction.
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Compensatory leave is another way for employers to pay overtime. It is important to understand what it is to avoid mistakes and ensure that it’s applied effectively within the company. There are some small subtleties to keep in mind regarding compensatory time off such as employee eligibility, local and national laws, and how to calculate it. Although this practice may seem complex, when everything is well understood and set up it is easy to carry out and benefit from.
Understanding compensatory time off
What is compensatory time off (comp time)?
Compensatory time off, also called comp time, is simpler to understand than we may think. It is the time granted to an employee when he has worked more than his regular hours. For example, if an employee has worked on evenings, weekends or on public holidays, he can choose or be offered time off, rather than being paid for the number of hours worked in excess. Comp time is a way for employers to balance out overtime that employees may have done beyond their regular schedule.
Who is the compensatory time off for?
Hourly employees: In the United States, under The Fair Labor Standards Act (FLSA), hourly employees are not considered as being eligible for compensatory time off. In their case, they would be paid in exchange for working over their regular hours. These criteria may differ depending on the states’ law, it is then important to make sure to comply with these laws or the internal policies of the organization.
Salaried employees: Salaried employees usually qualify for comp time since they are not entitled to be paid for their overtime. In this type of case, employers tend to offer them time off to compensate for their excess hours worked. Again, this may differ depending on the country, state, province or the business.
Private sector: According to the FLSA, private sector employees are not eligible for compensatory leave. Their employers are only able to cover their overtime by paying them in cash.
Public sector: For their part, public sector employees can receive compensatory time off, but only if they comply with FLSA regulations. Their employers can therefore offer them time off in exchange for overtime. However, employees must agree to this arrangement before working the hours outside their regular schedule.
Laws may vary according to geographic location
As mentioned previously, laws regarding compensatory leave can differ depending on the country, state or province. In the United Sates, comp time is controlled under the FLSA laws, but there can also be other laws or regulations depending on the states. In Canada, it is the Treasury Board of Canada Secretariat who deals with these laws. However, there may be variations depending on collective agreements or internal company policies. In both cases, it is important for employers to comply with the local laws in order to avoid legal complications.
How does the compensatory time off (comp time) work?
Compensatory leave can be granted in several scenarios where an employee would have worked excess hours. Following are the most common situations where an employee could benefit from comp time.
- Work during public holidays: If an employee is required to work during a public holiday, he is often going to receive time off as compensation for his hours worked, if he is eligible. For example, an employee who must work during Labor Day will most probably be offered another day off.
- Overtime beyond regular schedule: When an employee must work more than his regular working hours, whether it’s staying at night, coming in early or work during the weekends, if he is qualified for comp time, will be offered equivalent time off.
- Special events or circumstances: Compensatory time off can also be offered to employees who work during special company events like a conference or a special meeting. It can also be when an employee must travel for work.
How to calculate comp time?
Calculating compensatory time off shouldn’t be complicated, but understanding how to do it is a crucial step to being able to do it effectively. First, it is important to identity the number of overtime hours of the employee.
Most employers who propose comp time offers a one and a half hour of time off for every overtime hour.
For example, if an employee has worked 10 hours more than his normal hours, he would be granted with 15 hours of time off. (10 x 1.5 = 15)
Again, the number of comp time offered can differ depending on the organization or the local laws.
Usually, employees can accumulate their compensatory hours. However, employers often set a limit on the number of hours that can be accumulated. When this limit is reached, employees must use their paid leave before they can accumulate more.
Differences between compensatory leave & overtime pay
Main difference
Compensatory leave and overtime differ from each other in the way they are compensated. While overtime is generally paid in monetary terms, comp time is compensated in the form of paid leave. In both cases, there are positives and negatives, for employers and employees alike.
Advantages & disadvantages of comp time
For employees, compensatory time off is a significant way of recovering overtime. In fact, it often allows for a better work-life balance, as it offers more flexibility when it comes to time off. Employees have a little more control over their choice of days off. Some also prefer this method to money, especially when the salary is already competitive.
On the other hand, there are a few things employees need to make sure they understand about comp time, so they can use it to its full potential. Compensatory time off often has an expiry date. Employees need to be aware of this and make sure they take their time off before the deadline. So, for some, this may mean more management and a more complex system than simply getting paid monetarily for excess hours worked.
For employers, compensatory time off can help them stay on budget, as they don't technically spend money on overtime for their employees. Moreover, for employers, it's also a good way of maintaining a good company culture and increasing employee satisfaction.
On the more administrative side, compensatory time off can be more complex for employers. Tracking accumulated hours requires good management, or automated software that can do so effectively. There is also some legal risk. Employers must ensure that they comply with the laws in force to avoid any binding situations.
Best practices to track and manage compensatory time off efficiently
Create a clear policy
Defining a clear compensatory time off policy is essential for companies. It will provide employees and employers with a concrete guide and clear process for an efficient and uncomplicated process. First, it is important to determine who is eligible, under what conditions and how many hours of leave each additional hour corresponds to. It is also important to determine the maximum accumulation of comp time and set a precise deadline for using them. Finally, the employer must ensure that the policy is consistent with local laws.
Keep records
It is important to keep detailed records of overtime worked by employees. This may be necessary for some evidence and to keep a close eye on the work of employees. Employers must also ensure that they keep track of the accumulation and use of employee comp time to stay up to date.
Use an HR software
Using HR management software makes the process easier by automating overtime recording and allowing employees and employers to view overtime quickly. PurelyHR’s Time-Sheet and Time-Clock modules make it easy to calculate employee overtime. It is also possible for employers to determine the scales of overtime for their company. For example, they may decide that each week when an employee works more than 40 hours, these excess hours are automatically added to the platform’s overtime bank. With PurelyHR, it is much easier to track and simplify this kind of task.
Clear communication between employees and employers
Clear and effective communication between employees and employers is necessary to ensure that the compensatory time off policy is respected by both parties. Ongoing communication also helps to avoid long-term misunderstandings and conflicts and maintain good working relationships.
Compensatory leave is not complicated, it’s just a matter of understanding it well and using effective tools to manage it. You want to simplify the management of comp time with PurelyHR? Start your 21-day free trial today or book a demo and see for yourself how PurelyHR can help you automate comp time tasks.
