Analyzing the Use of “Comp Time”

Federal law does not recognize most “comp time” arrangements.

Many churches have implemented “comp time” arrangements as a way to avoid paying overtime compensation to hourly employees who work more than 40 hours in one week. Instead of paying employees overtime compensation at a rate of one and a half times their normal rate of pay (“time and a half”) for hours worked in excess of 40 in the same week, the employer “contributes” the excess hours to a “comp time account.” Employees who work less than 40 hours in a week can draw upon their accumulated comp time so that they receive their normal paycheck for 40 hours of work. Federal law does not recognize comp time arrangements as an exception to an employer’s obligation to pay overtime compensation, although comp time arrangements during the same pay period are allowed. For example, a church can allow hourly employees to work more than 8 hours on some days and less than 8 hours on other days during the same pay period, so long as employees do not work more than 40 hours during a week. Some states do not recognize this exemption under state law. A bill (H.R. 119) has been introduced in Congress to allow employers to offer comp time arrangements without violating the federal overtime compensation law, but only if employees are given the right to receive their comp time at a rate of not less than one and a half hours for each hour of employment in excess of 40 during the same week.

This article first appeared in Church Treasurer Alert, August 2003.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.
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