Can we offer more vacation in lieu of OT pay? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Can we offer more vacation in lieu of OT pay?

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in Human Resources,Overtime Labor Laws

Q. May an employer compensate an employee for overtime work by awarding additional paid vacation time equal to the total accrued overtime?

A. No. Under the Fair Labor Standards Act, the full amount of both straight time and overtime wages due an employee must ordinarily be paid at the regular payday for the period in which the work was performed. Private-sector employers are not permitted to provide nonexempt employees with compensatory time (comp time).

Private employers may, however, adjust the number of hours in a workweek to avoid incurring overtime. For example, if a nonexempt employee works 40 hours by quitting time on Thursday, you may give her the following day off (assuming a weekly pay period). The employee then collects her wages for the 40-hour workweek with no overtime.

By way of comparison, if that same employee works an additional eight hours on Friday, you can’t compensate her by offering 12 paid hours off the following week. How­­ever, you may limit the number of hours worked in the following workweek so that the employee is paid the same amount during that pay period as if she had worked two 40-hour work­­weeks with no overtime. (The records would reflect that you paid for 40 regular hours and eight over­time hours in the first workweek and 28 hours in the second.)

An exception to the comp-time restrictions applies to employees of government agencies. Public em­­ployers may grant employees paid comp time at a rate of not less than one and one-half hours for each hour of employment for which overtime compensation is required.

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