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A compensatory time off plan, or comp time plan, provides nonexempt employees with paid time off to be used in the future in lieu of paying them overtime for hours worked in excess of 40 per week. Comp time is an acceptable practice for many government employers; however, the Fair Labor Standards Act (FLSA) generally does not permit private employers to offer comp time off in lieu of overtime pay for private-sector employers. Employers should apply the same policy when allocating comp time to non-exempt public employees who typically receive time and a half for any overtime hours worked. An employee should receive 1.5 hours of compensatory time off, for instance, for every hour of overtime they work.
Time tracking and pay policy features available in HR software facilitate the smooth functioning of compensatory time off as it automatically tracks the overtime hours worked and the related compensation for it avoiding hours of manual work for the HR team.