What is Compensatory (Comp) time?
Managing Compensatory Time and Overtime for Montana Municipal Employee
Non‐exempt staff ‐ Many municipalities have struggled with the appropriate use of compensatory or "comp" time with its hourly or non‐exempt staff. In basic terms, comp time is utilized as an alternative to overtime pay for non‐exempt employees. The Fair Labor Standards Act (FLSA) defines compensatory time off as paid time away from the job that is earned and accrued by an employee in lieu of a cash payment for overtime compensation, at the rate of
no less than one and one‐half hours of compensatory time for each hour of overtime worked. Under the Act, only government agencies may legally allow their non‐exempt employees time off in place of wages. Who is eligible for overtime? Under the FLSA and Montana wage and hour law, non‐exempt employees must receive overtime pay for all time worked in excess of 40 hours per workweek. Overtime pay must be at least one and one-half times the employee's normal hourly wage rate. Municipalities subject to collective bargaining agreements may have
an obligation to pay overtime after eight hours a day if it is specified in the union/employer contract. Too much of a good thing? Compensatory time in lieu of overtime pay may minimize the immediate costs associated with extended workweeks, but it does not come without risk. It is important that employers consider the maximum liability associated with “banked” compensatory time. Any time on the books is considered compensation at termination – including compensatory time. It is important to not only limit the maximum accrual, but also the maximum time to use the accrued compensatory time to ensure a balanced accrual and use Montana Municipal Officials Handbook 114 relationship. Do we need a written policy? It is recommended that municipalities establish a written policy that limits the number of comp time hours that can be accumulated in a fiscal year. If an employee reaches the limit before the end of the fiscal year, the municipality should switch to paying overtime until the comp time balance is reduced. In addition, if an employee is unable to take their comp time by the end of the fiscal year, one solution is for the municipality to pay the employee the amount due at the appropriate one and one‐half rate and return the employee’s comp time balance back to zero. These steps will help a municipality avoid staff building up thousands of comp time hours over the course of several years. Although an employer may allow an employee to choose between comp time and overtime pay, it is the municipality’s obligation to ensure that the non‐exempt employee is compensated for all time worked in excess of 40 hours per workweek.
no less than one and one‐half hours of compensatory time for each hour of overtime worked. Under the Act, only government agencies may legally allow their non‐exempt employees time off in place of wages. Who is eligible for overtime? Under the FLSA and Montana wage and hour law, non‐exempt employees must receive overtime pay for all time worked in excess of 40 hours per workweek. Overtime pay must be at least one and one-half times the employee's normal hourly wage rate. Municipalities subject to collective bargaining agreements may have
an obligation to pay overtime after eight hours a day if it is specified in the union/employer contract. Too much of a good thing? Compensatory time in lieu of overtime pay may minimize the immediate costs associated with extended workweeks, but it does not come without risk. It is important that employers consider the maximum liability associated with “banked” compensatory time. Any time on the books is considered compensation at termination – including compensatory time. It is important to not only limit the maximum accrual, but also the maximum time to use the accrued compensatory time to ensure a balanced accrual and use Montana Municipal Officials Handbook 114 relationship. Do we need a written policy? It is recommended that municipalities establish a written policy that limits the number of comp time hours that can be accumulated in a fiscal year. If an employee reaches the limit before the end of the fiscal year, the municipality should switch to paying overtime until the comp time balance is reduced. In addition, if an employee is unable to take their comp time by the end of the fiscal year, one solution is for the municipality to pay the employee the amount due at the appropriate one and one‐half rate and return the employee’s comp time balance back to zero. These steps will help a municipality avoid staff building up thousands of comp time hours over the course of several years. Although an employer may allow an employee to choose between comp time and overtime pay, it is the municipality’s obligation to ensure that the non‐exempt employee is compensated for all time worked in excess of 40 hours per workweek.