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What is compensatory time off? Guidelines for exempt and nonexempt employees.

A compensatory time off policy, or comp time, allows employees to take time off rather than receive overtime pay if they work beyond their scheduled hours. Many industries have compensation time policies, particularly in the public and government sectors, which can provide employees with increased flexibility and work-life balance. A paid day off can be a vacation day, sick leave, or personal day. Compensatory time off can sometimes be reimbursed financially.

In this blog, we will discuss FLSA compensatory time off guidelines for both exempt and nonexempt employees.

Exempt and non-exempt employee’s compensatory time off guidelines by FLSA

The purpose of compensatory time off is to make up for extra hours worked. Overtime pay laws differ from state to state and depending on whether you’re exempt or not. According to FLSA guidelines, employees must use their accrued compensatory time off (CTO) by the 26th day of the period in which they earned it. When an employee fails to use their compensatory time off due to exigencies of service outside their control, they must be paid at the overtime rate for the unused time.

Non-exempt employees:

  • Employees working beyond 40 hours per week are considered non-exempt and are entitled to overtime pay.
  • A non-exempt employee is typically compensated hourly and entitled to overtime pay if he or she works more than 40 hours a week. Employers must pay overtime at 1.5 times their regular pay.
  • The extra hours worked by non-exempt employees may qualify for compensatory time off rather than overtime pay.
  • Non-exempt employees who accumulate compensatory time must use it for a minimum of 26 pay periods after earning it or be paid at the overtime rate.
  • Private sector non-exempt employees are not eligible for compensatory time off.
  • Non-exempt public sector employees, however, may earn up to 240 hours of CTO if their employer offers it. The employer must provide CTO in lieu of cash overtime pay to non-exempt employees in the public sector.

Exempt employees:

  • Exempt employees, such as executive, administrative, and professional employees, are not entitled to overtime pay under the FLSA.
  • In general, exempt employees are paid a salary and do not receive overtime pay for overtime hours worked beyond the regular workweek.
  • Exempt employees may qualify for compensatory time off if their basic pay rate exceeds the rate for GS-10, step 10.
  • In some cases, exempt employees will be granted compensatory time off at their employers’ discretion. However, it is not a mandatory benefit and must be taken within the period of 26 days in which it is earned. It is a benefit that some employers offer to exempt employees, while others do not.
  • Employees are usually offered CTO based on their employer’s policy, which may be a percentage of their weekly or monthly wages, or it may be a flat rate.
  • Compensatory time off may be available for public sector-exempt employees who meet certain conditions.

End note:

The guidelines for compensatory time off (CTO) may differ depending on the employee’s exemption status. Exempt employees are not entitled to overtime pay, but may be eligible for compensatory time off under certain circumstances. Non-exempt employees are entitled to overtime pay and compensatory time off. As long as applicable laws and internal policies allow, employers may offer CTO to both exempt and non-exempt employees. To ensure employee use of CTO is appropriate, it’s important for them to understand their employer’s policies.

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