A company's compensatory time off (CTO) is a policy to compensate employees for the overtime they put in. Here, the employees can choose to be compensated for these extra hours in the form of paid time off.
CTO is also referred to as comp time which functionally is a paid time off policy where the employees may take a leave or day off as compensation for overtime work.
For instance, if an employee has worked for forty-five hours a week, he should be allowed time off for those extra five hours instead of getting paid for overtime.
Companies implement accurate comp time-off calculation systems within the organizations. Hence, employers can ensure no employee is deprived of their deserved paid time off.
Calculation of Compensatory Time Off
Different companies implement different comp time tracking systems using a wide range of software or applications. In those apps, the employees who are supposed to work overtime must record their starting and finishing times for the particular task.
Hence, the accumulated minutes or hours get recorded in the tracking sheet of the employees. Afterward, the employers will calculate the supposed comp time as per their policy while permitting them the compensatory time off.
As per the Fair Labor Standards Act (FLSA), employees (except for the exempts) must receive overtime compensation if they’ve worked more than forty hours a week.
The Legitimacy of Compensatory Time Off
The legitimacy of compensatory time off varies from state to state, depending on the exempt and nonexempt employees. Besides, it has to be considered whether the CTO is applicable in the public or private sector.
Fair Labor Standards Act (FLSA) attests that nonexempt private sector employees aren’t supposed to receive compensatory time off. Instead, they’re supposed to be compensated with conventional overtime hours.
Furthermore, compensatory time off may be accommodated instead of overtime for occasional overtime tasks. This may apply to both FLSA-exempt and nonexempt employees.
Besides, CTO can also be implemented in case of ‘prevailing rate employee,’ as per 5 U.S.C. 5342(2). However, it may not be authorized that a prevailing rate employee should be compensated for occasional or irregular overtime tasks while the CTO is granted.
Time Limits in CTO
When an employee is an FLSA exempt, they must be compensated for the comp time as their 26th pay period progress near the end.
However, a company might ensure that an FLSA-exempt employee should receive:
compensation on the unused comp time at the rate of their overtime; effective when earned.
Forfeit the unused comp time unless otherwise failed to utilize the compensatory time off because of a service urgency.
How to Incorporate Compensatory Time Off?
The responsible HR leaders must take the following actions to incorporate compensatory time off in the company successfully:
Adhering to the Rules: The HR leaders must have a precise and thorough comprehension of the labor law so that they can compensate the employees accordingly. Moreover, they must consider consulting comp law professionals at regular intervals since the FLSA rules are very intricate and subject to occasional updates.
Train the Employees: HR leaders are supposed to train and educate the employees on comp time and overtime rules and policies before they start doing comp time or overtime work.
Communicate with Managers: The HR leaders must educate the managers on the compensatory time off rules and regulations once they’ve learned them. This makes the compensation process transparent.
Benefits of Implementing CTO
Companies can benefit by implementing compensation time off in the following manner:
Compensating the employees on CTO reflects integrity and transparency.
Improving the relationship between employers and employees.
Saving the companies from breaching the law.
Ensuring the rights of the employees and workers.
Understanding the FLSA rules for CTO can save businesses from unintentional lawsuits and financial damages.