Compensatory time, commonly known as “comp time,” is defined as “time off the job that is earned and accrued by an employee instead of immediate cash payment for working overtime hours.” Unfortunately, if the employee is in a non-exempt position in a private sector business, comp time is a violation of the Fair Labor Standards Act (FLSA). The FLSA requires private-sector employers to provide overtime pay for hours worked over 40 in a workweek. A non-exempt employee does not meet the exemptions to overtime outlined in the FLSA, and is usually paid an hourly wage.

The FLSA allows an employer to grant exempt employees additional time off as a reward for working extra hours. An exempt employee is one in a position that is “exempt” from overtime pay because the position meets specific criteria outlined in the FLSA. We at The Employer Group caution our clients that using the term “compensatory” or “comp” time is a legal term specific to the public sector; we recommend clients simply provide the employee with additional paid time off (PTO) if they choose to reward exempt employees for working above and beyond their normal work week.

While the FLSA covers the federal law, be cautious of additional state regulations. The Employer Group has a very experienced payroll staff – we’re here to help our clients understand their requirements to ensure compliance with federal and state payroll laws. If you’re looking for a payroll partner who has your best interests in mind, contact The Employer Group!