Employees are often more than willing to put in extra hours to help accomplish a specific team or company goal. Participating in special events, trade shows, product launches, and other occasional high-intensity activities can be fun and rewarding for motivated staff members.
In these circumstances, it can be tempting to get creative when compensating helpful employees for this additional time. It can also be a violation of the Fair Labor Standards Act.
Understanding comp time
Compensatory (comp) time is sometimes offered to non-exempt employees instead of overtime pay. Rather than paying employees time and a half for those extra hours, a company or supervisor might offer additional paid time off to make up for the additional time worked.
Here’s an example: An employee works 48 hours one week as a result of helping out with a company special event. In return, their employer offers to give them an additional paid day off at some other time.
While this may sound like a great idea to many employers and employees, it’s usually illegal.
When is it okay to use?
If you’re dealing with public sector employees under a union contract, you may be able to provide comp time in a manner that doesn’t violate the FLSA. Here are a few things to keep in mind:
- The comp time strategy must be spelled out and agreed to before the extra hours are worked, not after the fact.
- Employees can’t be required to work mandatory comp time on a regular basis.
- Comp time must be paid at the same rate as overtime pay, meaning employees should receive one and a half hours of comp time for every additional hour worked.
Some states have passed laws allowing private employers to provide comp time instead of overtime. If you’re in one of those states, you may be in the clear. Just keep in mind that these laws can be complex and difficult to interpret. Make sure you have a clear understanding of what you can and can’t do. Working with an employment law expert when developing your compensatory time program is always a good idea.
Staying in compliance
If you’re a “better safe than sorry” kind of person, you may want to toss the idea of comp time out the window altogether.
Focusing on a clear compensation system includes accurate timekeeping, meticulous record-keeping, and careful attention to hours worked. Overtime pay calculations might be the best solution for your business and your employees.
If your employees are putting in extra hours, here are few things to keep in mind:
- Overtime can be mandatory, but comp time cannot.
- Workers can’t volunteer their time or waive their right to overtime pay. Businesses are required to pay overtime to eligible employees, even if that employee wants to work unpaid.
- Non-exempt, overtime-eligible employees must be paid overtime for additional hours worked, even if the overtime was unauthorized or prohibited.
- Overtime must be paid at the correct rate. Simply paying overtime wages isn’t enough to keep you in compliance. Compensating employees for overtime incorrectly is also a wage and hour violation.
- Private sector, non-exempt employees covered by the FLSA must be paid time and a half for all overtime hours worked. Offering them comp time for extra hours worked is a violation of federal law. (Unless your state says differently.)
- Exempt employees are not entitled to overtime pay. However, exempt employees must be classified correctly according to their job role, duties, and salary. Classifying someone as exempt to avoid overtime pay is a big no-no.
It’s not uncommon for employers to do everything they can to avoid paying overtime, but sometimes it isn’t a matter of ill intent or gaming the system. Sometimes, your employees really do just want to go above and beyond, working extra hours in the process. And you may want to let them.
Unfortunately, those helpful staff members may not realize they are putting the company in jeopardy—and you might not realize you’re in danger of non-compliance.
Know the risks
Overtime isn’t just about money or being in compliance. Sometimes, it’s about how much work there is and who may or may not be willing to do it.
Even if you are following all the rules, classifying your employees correctly, and accurately paying people for all of their time, there are a couple of reasons you may want to keep overtime hours in check.
Expecting your exempt employees to work more than their fair share on a regular basis isn’t a good employee retention strategy. Employee burnout is real. And so is math. If your exempt employees get to a point where they’re calculating their hourly wage, will that salary you’re offering still seem appealing?
Some employers pay out loads of overtime as if it’s a good thing. But be careful about whether those additional hours are optional or mandatory. Not every hardworking employee thinks being paid time, and a half is worth missing every one of their kid’s soccer games.
Finding that sweet spot where work hours, employer compliance, and employee satisfaction all come together will keep you out of trouble, make your business healthier, and make your team happier.
Is your benefits broker also a compliance consultant? What about a trusted business partner? Are you confident your policies and processes are doing what they need to ensure that your company—and your employees— are healthy and productive? Get in touch with Raffa to see how we can help your organization become a local employer of choice.
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