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In the evolving landscape of work culture, the quest for flexibility and work-life harmony is more pronounced than ever. Compensatory time off, commonly known as "comp time," stands at the forefront of this shift, offering a viable alternative to traditional overtime pay.
Comp time allows employees to accumulate hours worked beyond their standard schedule, which they can then use to take time off, fostering a more balanced and flexible work environment. But the leap from an informal practice to a formalized comp time policy is not just a step towards operational clarity—it's a strategic move that can significantly enhance your company culture and align employee efforts with your organizational goals.
The journey towards implementing a comp time policy, however, is paved with intricate legal and human resource considerations. Whether you're drawing inspiration from a sample policy or starting from the ground up, understanding the legalities, including the Fair Labor Standards Act (FLSA) compliance and state-specific regulations, is paramount.
This article aims to demystify comp time, answering pivotal questions such as its legality, regulatory implications and how to create a policy that not only complies with the law but also supports your company's values and workforce needs.
Here are five critical insights to consider before drafting your comp time policy:
Granting compensatory time off in the traditional sense may be illegal under the FLSA comp time rules.
Before you write your comp time policy, you should understand the answer to the question: "Is comp time legal?” The answer might surprise you.
Under the FLSA, comp time may not be provided by private employers in lieu of overtime payments to nonexempt workers. In layman’s terms, this means that, as a business that is not owned by the government, you must pay your FLSA-nonexempt workers overtime at the rate of 1.5 times their typical rate of pay for all hours worked above 40 in a working week. Awarding them time off instead (even at a rate of 1.5) is not an acceptable workaround.
Comp time isn’t a great idea to extend as a reward to exempt employees who have worked past 40 hours, either—at least not in the traditional sense. Exempt employees are paid a salary that doesn’t change whether they work exactly 40 hours, a bit more, or a bit less (with narrow exceptions). If you want to grant exempt or nonexempt employees additional paid time off, there are ways to do it that won’t put you in the middle of a compliance minefield.
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Compensatory time off is a legal term… with legal weight. The United States Department of Labor (DOL) defines the term as “paid time off the job that is earned and accrued by an employee instead of immediate cash payment for working overtime hours.”
As discussed above, this is a practice that is not permitted in the private sector. If you still want to offer paid time off as an incentive, however, you can do so—you just need to do so in a compliant way.
If you’d like to reward employees with additional PTO, the Society for Human Resources Management (SHRM) recommends using the terms “personal days” or “flexible time off” to describe the incentive. Just make sure that you’re not awarding this type of incentive instead of time and a half overtime payments for compensable hours that are otherwise due under the FLSA.
Setting parameters around the use of awarded time off can help make sure everyone is on board.
Company policies surrounding flexible or personal time off should be written down and made accessible to all employees. Because of the case-by-case nature of many time-off approval scenarios, these types of practices are particularly vulnerable to being applied unevenly or unequally.
When employees perceive unequal treatment, you can find yourself in a suboptimal situation culture-wise.
The rules you create and enforce around flexible or personal time off will be unique to your business, its needs and the needs of your employees. Here are a few guidelines to consider incorporating in your written time off policy:
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Training your managers and supervisors about your flexible time off policies is as important as writing them down.
Ensuring that managers and supervisors are well-versed on the parameters of your flexible time off policy is essential for your policy’s successful implementation. While formal training may not be necessary, you might find it beneficial to organize a meeting with all supervisory managers to provide clear communication surrounding the policy.
Make sure supervisors have a clear understanding of when they should and not be granting time off requests, how employees should be logging their time off, and where supervisors can turn if a conflict arises.
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Having an HR compliance expert review your employee policies is always a best practice.
Developing a flexible or personal time off policy isn’t a task your organization has to handle on its own. Axcet HR Solutions is a certified professional employer organization (PEO) that understands employee relations, risk management, and human resources compliance for small businesses. We’re happy to help you develop, implement, and train your employees on the flexible time off policy that works for you.
With Axcet HR Solutions, you’ll find that there’s no end to the benefits a growing company can reap by working with a professional employer organization. Wondering if a human resources outsourcing company is right for you? Schedule a consultation today to learn more.
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