Comp Time: What It Is, Who Qualifies, and How to Calculate It

Overtime is not for everyone. While some employees jump at the chance to earn some extra cash, others want to maintain a strict work-life balance.

But if you have a busy week, you may find it difficult to recruit enough staff to your company while respecting the preferences of each team member.

And using overtime is not a sustainable strategy. Of course, occasional emergencies and one-time events can be eaten up by your labor budget. But if you rely on overtime each week to cover shifts, rising labor costs will exceed your profits.

Clearing time is a one-touch way to solve these problems. By offering days off in exchange for overtime, you can avoid overtime pay, properly cover each shift, and encourage your team to work more hours.

Because competition time is a complex subject, we cover all the guidelines you need to know before you start using it. Our article explores:

If compensation time is still legal Which staff are eligible How to calculate compensation time How to set up clearing time for your business A free clock that frees up your time.

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What is clearing time?

Compensation time (otherwise known as compensatory time off) is the practice of offering employees additional paid time off in exchange for working beyond their normal hours. This PTO replaces standard overtime pay.

This way, you can reward employees for taking more shifts and ensure full shift coverage while reducing overtime.

Offering make-up time can also improve morale and increase retention rates. Employees may find it difficult to pack vacation and personal commitments into the PTO or find that they need more days off after using all of their allocated time off. Compensation time gives your team more control and flexibility over working hours so they can better manage time off.

In some cases, compensation time helps you retain staff. For example, students can book days off for exam season instead of handing in their convocation.

Is compensation time legal?

Compensation time is legal under US federal law, but there are many rules and restrictions. The Fair Labor Standards Act (FLSA) states that:

Employees must agree to the arrangement They must use the free time they accumulate during the same pay period Employers must also respect the compensation time once they have concluded the agreement They must also pay for unused compensation time if it expires Compensation time cannot exceed 240 hours per year (except for some healthcare and emergency service workers who can take 480) The minimum rate is 1.5 hours of compensation time per additional hour

Laws on compensation time also vary from state to state. For example, Alaska has banned this practice altogether and California allows it only in a few cases.

Check your state's Department of Labor (DOL) website for the most up-to-date compensation time regulations in your area.

Who is eligible for compensation time?

The main rules and regulations relating to compensation time concern different types of workers. So, let's identify the different categories and what rules apply to each.

Pay time for exempt and non-exempt employees

Before we dive deeper, let's clarify the difference between exempt and non-exempt employees. Treat "exempt" as "exempt from overtime pay". Thus, exempt employees cannot earn more money by working overtime while non-exempt employees can.

Note: Exempt does not always mean salaried. If salaried staff have executive, administrative or...