What Is Compensatory Time?

Compensatory time, or comp time for short, is PTO you may award to an employee for their overtime work. Compensatory time is given in place of overtime pay, making it a cheaper option as far as your company’s payroll is concerned.

What are the benefits of comp time?

The main benefit of comp time is the payroll savings it can offer your business. It will directly reduce your payroll costs, helping your business save on its periodic expenses.

Another benefit of comp time is that it can reduce the risk of burnout in your team. Meanwhile, overtime pay can act as an incentive for employees to overwork themselves, leading to productivity levels that are not sustainable in the long run.

Is compensatory time legal?

The legality of comp time depends on what overtime laws your business has to abide by. Generally, if you don’t have to pay overtime to your staff, you could offer compensatory time as a more affordable perk. However, if you’re required to pay for overtime, then you likely can’t offer comp time instead of it. Consult with a local labor lawyer for accurate info on the legality of compensatory time for your business.

How is comp time calculated?

Compensatory time is typically calculated with a one-to-one ratio in relation to worked overtime hours. However, you could also use a different ratio to reward your staff in different ways. For example, you could award 1.5 hours of comp time for each hour of overtime to incentivize overtime. You could do this for a short period to speed up progress on a project.

Check out our guide on comp time vs. overtime for employers to learn more.