A perceived lack of truthful or aggressive compensation is a significant purpose for worker turnover, and ‘compensation’ contains greater than an individual’s take-home pay packet. It pays to grasp the numerous methods you’ll be able to compensate staff—together with comp time—and the way to take action whereas staying throughout the regulation.
Desk of Contents
What’s comp time?
Compensatory day off is a simple thought. As a substitute of financial compensation for hours labored, an employer provides the worker paid time away from work as an alternative. Comp time can be referred to as day off in lieu (TOIL).
Comp time could be provided when an worker works past their traditional hours:
- So, let’s say your worker often works 35 hours every week, however they labored seven further hours throughout every week with a purpose to full an enormous venture.
- You would possibly encourage them to take a paid time off the next week, with out having to make use of their collected PTO, thus compensating them with the equal of seven hours.
Comp time is usually considered as an various to paying extra time charges—as a cost-saving measure for a company—however that’s solely legally permissible in restricted instances (coated additional down).
Comp time as an worker profit
Comp time may merely be a constructive manner to supply flexibility and present appreciation to staff. That is very true the place there’s no obligation to pay extra time, reminiscent of your salaried workforce.
The place an worker receives a wage, their revenue is usually seen as compensation for any and all hours labored, as per circumstances set out of their employment contract—with no provision for extra time. Nevertheless, employers can select to reward and recognise salaried staff, which may embrace bonuses, commissions, extra time and paid day off (e.g., comp time).
Why would possibly an employer achieve this?:
- To distinguish their employer model and appeal to high expertise.
- To encourage and encourage wholesome competitors amongst staff.
- To provide managers extra avenues to allow work-life stability and scale back burnout.
Is comp time authorized?
Whereas it could be frequent observe in some workplaces, relying on the kind of worker and office it will not be authorized to supply comp time. The obvious state of affairs the place comp time is prohibited is when an worker is legally entitled to extra time pay.
Within the US, federal labor legal guidelines make it unlawful to keep away from paying extra time to eligible employees (except they’re exempt) after they go over 40 hours in a typical work week—which might require further hours to be compensated at 1.5X the standard fee of pay (aka, ‘time and a half’).
Numerous state legal guidelines may apply. For example, California has extra extra time guidelines in place that defend most employees, together with many salaried staff—and comp time could be taken, however solely on the staff’ request and the place a written settlement is in place.
To legally provide comp time, you’ll must fastidiously decide:
- Whether or not your staff are exempt or non-exempt in response to federal legal guidelines?
- Related state-based legal guidelines, primarily based on the place the worker works, which will apply?
What’s a non-exempt worker?
Non-exempt staff are entitled to the minimal wage and extra time necessities. Within the personal sector, most employees paid on an hourly fee can be coated by the Honest Labor Requirements Act (FLSA), and due to this fact be entitled to extra time after they work past 40 hours.
In keeping with the US’ Division of Labor, for non-exempt staff beneath FLSA legal guidelines: “The extra time pay requirement can’t be met by means of the usage of compensatory day off (comp time) besides beneath particular circumstances relevant solely to state and native authorities staff.”
Which employees are exempt from FLSA extra time?
Salaried, full-time staff are typically exempt from extra time necessities, which is usually known as the EAP exemption (with EAP standing for Govt, Administrative and Skilled).
Exempt staff within the enterprise sphere sometimes maintain ‘white collar’ roles reminiscent of:
- Senior enterprise leaders and executives.
- Administrative workplace employees concerned in enterprise operations, and out of doors gross sales.
- Pc-based roles reminiscent of analysts, software program engineers, programmers and builders
- Professionals with superior data doing work that’s ‘predominantly mental’ in nature, or that requires inventiveness and expertise associated to inventive or artistic work.
The exemptions solely apply the place the job being carried out meets sure standards (e.g., for an government, the work should embrace administration duties, supervisory obligations and hiring powers) and supplied the workers’ annual wage is a minimal of $35,568 yearly, which equates to at the least $684 per week.
Different staff exempt from extra time pay (however not minimal wage) embrace:
- Some retail and repair employees who work on fee, and auto and farm gear salespeople and mechanics.
- Taxi drivers, supply drivers, and staff of railroads and air carriers.
- Broadcast information announcers and editors.
- Stay-in home service employees.
- Staff of film theaters.
- Farmworkers.
Latest adjustments to the rules round exempt employees by the US Division of Labor embrace a 2023 proposal to revise the principles for figuring out whether or not salaried employees are exempt. The Division once more seeks to extend the usual wage degree—to $1,059 per week—in addition to arrange an automatic mechanism to replace earnings thresholds each three years in step with present wage information. The proposal is open to feedback from the general public till 7 November, 2023.
The exception for non-exempt authorities staff
As talked about above (and considerably confusingly), whereas many state and native authorities staff can be outlined as ‘non-exempt’, they are often provided comp time. Public sector staff are an exception to the rule.
In fact, the FLSA contains guidelines that govern how comp time is supplied to public sector staff, which incorporates:
- The necessity for an up-front settlement or understanding that comp time can be supplied.
- Guidelines round how comp time is paid out, when it may be taken and the way it’s paid if an worker resigns.
- Limits on the quantity of comp time that may be accrued.
Dangers of illegally utilizing comp time
Not adhering to US federal labor legal guidelines could be extraordinarily pricey for employers. In addition to having to re-pay wages and damages owed to staff, violations of the requirement to pay extra time can lead to felony prosecution, financial fines of as much as $10,000, and even imprisonment.
When and why do you have to present comp time?
Whether or not you present comp time for workers exempt from extra time legal guidelines must be clearly deliberate and articulated as a part of your broader workforce administration and HR insurance policies. It is smart to have interaction your crew and search their suggestions on the worth of comp time.
If you happen to go down this path, you’ll need to be certain that your line managers have the capabilities to observe and observe individuals’s workloads, hours labored, productive time and dealing patterns—to keep away from staff unnecessarily placing in further hours to entry comp time.
Avoiding misuse of comp time as a profit comes right down to:
- Readability for workers and managers concerning the comp time coverage—particularly round when extra time is required, how it’s authorised, and when and the way comp time is accessed. This reduces the possibilities of comp time being inconsistently utilized by managers throughout completely different groups, which may create resentment and negatively impression tradition and morale.
- Having the ability to pretty assess each hours labored and efficiency throughout hours labored, in addition to handle the workflows round monitoring and approving further time and duties. With clear oversight of time labored throughout each crew member, you’ll be able to extra simply spot poor workload administration throughout groups or poor time administration at a person degree.
How do you calculate comp time?
If you happen to’re offering comp time as extra compensation to a salaried employee, it’s at your discretion the way you’ll calculate comp time.
The place you’re offering comp time as an alternative of extra time as a part of a proper settlement with staff—the place legally allowed—it might be calculated the identical manner you’d calculate extra time pay: each hour labored over 40 hours is multiplied by 1.5.
As an equation, it appears to be like like this:
(Complete hours labored throughout every week – 40 hours) X 1.5 = Comp time due.
How is Time Physician used to trace comp time?
Offering comp time to staff can turn out to be difficult and extra more likely to be disputed in case you’re not crystal clear on when staff truly labored.
An automatic and employee-friendly time monitoring device like Time Physician makes it easy for each staff and their managers to seize and analyze each hour labored, even throughout a number of, staggered shifts which may not replicate a typical 9-5 schedule.
Conserving and sustaining correct data about hours labored every day, and whole hours labored every week—in addition to common and extra time earnings—is one other requirement of employers concerning staff topic to US labor legal guidelines. Whereas any timekeeping methodology is suitable “so long as it’s full and correct”—we’d argue that almost all handbook and analogue strategies put you liable to errors, gaps and misplaced information that may’t simply be discovered or audited in years to come back.
Even when your crew is employed on salaries, and exempt from minimal wage and extra time necessities, with the ability to observe time, monitor actions and measure productiveness gives a superb basis for fairer compensation long-term.
Equally, in case you’re eager to restrict the necessity for both extra time pay or comp time, you want efficient methods in place that:
- Alert managers when staff are approaching most work hours or losing important quantities of labor time on unproductive actions;
- Helps managers spot groups or roles that often exceed most hours, the place a strategic or resourcing intervention could also be wanted.
These patterns could be laborious to detect throughout a workforce in case you’re not receiving aggregated information about time labored introduced by way of easy-to-interpret studies and dashboards—one other space the place Time Physician stands aside within the worker monitoring market.
Need to enhance your potential to trace and compensate staff precisely? Request a demo of Time Physician in the present day.
Carlo Borja is the Head of On-line Advertising for Time Physician, a time monitoring software program for distant groups. He’s a full-time telecommuter, a digital nomad and a espresso junkie.
