Can I Bank Overtime Pay or “Time In Lieu” for My Employees?

This blog post is to simply share information with you that we found interesting. The content was gathered from various online resources related to overtime. We are not attorneys and do not provide legal advice. We highly recommend you consult with a labor attorney regarding overtime laws.

If your business pays employees by the hour, you probably have to budget for overtime wages. Non-exempt employees who work over the standard 40 hours a week earn 1.5 their normal hourly rate for each hour of overtime worked. During busy times of the year or when you are limited on staff, overtime dollars can quickly add up.

Many employers will allow or even force their employees to bank overtime hours to avoid paying out 1.5 times their normal hourly rate. However, under the provisions of the Fair Labor Standards Act, banking excess hours worked for non-exempt employees as comp time or paying them at the regular rate on future paychecks isn’t allowed. They must always be paid one-and-a-half times their regular rate for any hours worked over 40 in a workweek.

In certain sectors, such as in state and local government, employees may be eligible to earn comp time, as long as it’s agreed upon in advance. This cannot just be a verbal agreement either. The agreement must be in writing and made between the employer and the employee, or authorized employee representative, before any of the work is done.

Wisconsin law states whether an employer chooses to pay the overtime premium directly in wages or offers the employee compensatory time, the employer is obligated to pay the person 1.5 times their regular rate of pay for the overtime hours. If the employer pays the overtime premium by allowing the employee to use compensatory time, the employee is entitled to use 1.5 hours of comp time for each overtime hour worked. Nongovernment employers must also ensure the employee uses the compensatory time within 31 days of when the time is earned.

Illinois law states compensatory time off in place of payment for overtime is not legal.

If you failed to pay overtime and were required to do so, this could be a devastating mistake. There are hefty fines and other penalties when it comes to following overtime laws, so be sure you have a clear understanding of the overtime laws in your local sector. The burden of proof lies with the employer, so keeping accurate and contemporaneous time tracking records is a must and we can help you. If you are concerned you may be handling overtime incorrectly, you might want to contact a labor attorney. If you would like to know more about accurate time tracking tools, please don’t hesitate to contact us!