Q:  I manage hourly employees and I heard I could give them comp time instead of overtime pay.  Is this legal?

A:  Not if you work in the private sector.  The Dept of Labor has made it clear that “comp time” –defined as “compensating later with time-off” in lieu of overtime pay– may not be used by private employers.

However, it is permissible in the  public sector, where comp time is popular with employees because they get to have more time off.  Many private employers are under the impression that they too can use this method.  But they are wrong.

That does not mean that private employers are completely without options.

It’s true that you can’t avoid paying for overtime (hours worked over 40)  and those who try can pay dearly, if audited.  But there is some wiggle room to avoid incurring overtime in the first place, and to offset the costs if it is incurred.  Here’s how:

Avoid incurring by planning ahead.  On a week you know the employee will have to work late to cover a shift or meet a deadline, plan the schedule so that they can take time off during the same week.

Example:  I had an assistant that had to work a 12-hour day on Monday to cover a late monthly meeting (generating a possible 4 hours of OT). However, because we planed ahead she would go home by noon that same Friday (4 hours early), so no OT was incurred. She got a regular 40-hour workweek.  Bonus: She loved having an early weekend.

What if you can’t plan ahead and overtime hours are incurred?  If this happens and it’s during the first week of the pay period, you DO have another option:  offset the cost.

Offset the cost how?  You must pay for the overtime incurred the first week.  Then reduce the number of hours worked the next week, by one-and-half times the hours incurred the first week.

For example: If Fred works 44 hours the first week, you’d pay for 4 OT hours.   Then you’d give him 6 hours off (4 OT hrs x 1.5) the second week.

Granted, these two methods are not always practical and they may have a narrow application, but they’re worth considering when looking for a “payroll neutral” option, where your costs remain equal, and the employee gets time off.

Note:  Please consult your accountant or payroll specialist before implementing these ideas.

©Copyright Eva Del Rio

Eva Del Rio is creator of HR Box™ – tools for small businesses and startups. Send questions to Eva@evadelrio.com