What is Compensable Time and How Does It Work?

Compensable time refers to the hours an employee must be paid for, typically when they are required to work or remain on company premises. However, not every work-related activity qualifies for compensation, and failing to pay correctly can lead to legal issues.

We'll explore what counts as compensable time, which activities are included, and which are not, all in this article. We'll also address some common questions to help clarify these rules and find out how Salary.com's Data as a Service API can help your organization pay your employees right.

What is the meaning of compensable time?

Compensable time refers to any hours an employee is required or allowed to work, which must be paid according to the Fair Labor Standards Act (FLSA). This includes time spent during the employee's scheduled shift, as well as hours worked beyond the normal workday, for which employees must receive at least the federal minimum wage.

For overtime, which is considered any hours worked over 40 in a week, the FLSA mandates that employers pay employees one-and-a-half times their regular pay. For example, if an employee is required to remain on the job site during a meal period, this time is considered compensable and must be paid accordingly.

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Why does compensable time matter?

Compensable time is crucial because it ensures that employees are fairly compensated for all their work hours, including activities like travel or rest and meal periods during their normal work hours. The Fair Labor Standards Act (FLSA) and the Portal-to-Portal Act define compensable hours.

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Benefits of paying for compensable time

Organizations that properly compensate work related activities can expect the following benefits:

• Boosts employee morale: Paying for compensable hours, like meal periods or on-call time, shows employees that their time is valued, improving overall job satisfaction.

• Reduces legal risks: Compensating employees for all hours worked helps employers avoid back wages or Department of Labor penalties.

• Enhances productivity: When employees know they’ll be compensated for all their hours, they’re more likely to stay focused and motivated.

• Builds trust and loyalty: Fairly paying employees for their compensable hours strengthens the employer-employee relationship.

• Ensures compliance: Paying for compensable hours keeps employers aligned with labor laws, preventing potential disputes.

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Compensable vs non-compensable time

Compensable time refers to hours worked by an employee that must be paid, if the employee is not fully relieved from duty and must be compensated for these corresponding hours. The Department of Labor considers compensable time to include periods like bona fide meal periods, work travel, and certain hours when the employee remains on the employer's premises.

On the other hand, non-compensable time covers activities where the employee is completely relieved of duties, such as during unauthorized extensions of breaks or when playing checkers during a shift. Non-compensable time is generally not paid because the employee is not required to remain on duty or perform any work-related activities during these periods.

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Examples of compensable time

Common examples of compensable time include:

• Engaged waiting time: Pay employees for hours worked when they’re waiting to start a task, like a fireman playing checkers while waiting for an alarm.

• On-call at work: If an employee is on call and must stay on company premises, their time must be compensated.

• Rest breaks: Short breaks under 20 minutes must be paid because they are considered compensable.

• Working through meal breaks: If an employee works or remains on duty during lunch, the time spent must be compensated.

• Sleeping time (on duty less than 24 hours): Employees on duty for less than 24 hours who sleep during their shift must still be paid.

• On the job travel time: Travel between job sites during a regular workday is considered compensable and must be paid.

• Travel time on special one day assignment: If an employee travels to another city for a special one-day assignment, the travel time is compensable and must be paid.

Examples of non-compensable time

Here are common examples of non-compensable time:

• Non-engaged waiting time: If an employee waits without being required to work, like arriving early or staying late without tasks, that time is not paid.

• On-call at home: When an employee is on call but stays at home and isn’t called in, the time spent waiting isn’t paid.

• Meal breaks: Employees are not paid for meal breaks of 30 minutes or more if they’re completely relieved from duty.

• Sleeping time (on duty more than 24 hours): When an employee works for 24 hours or more, agreed-upon sleep time, up to eight hours, isn’t paid if sleep facilities are provided.

• Home to work travel: The time spent traveling from home to work and back isn’t paid, as it’s considered ordinary travel.

FAQs

Let's address some frequently asked questions about compensable hours.

How do you calculate compensable time?

To calculate compensable time, employers need to accurately track and document all hours worked by an employee, including any on call time or travel involved to another city. While the FSLA doesn't specify a format for record-keeping, it does require that employers maintain specific details, especially for minimum wage and overtime workers.

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Are all work-related activities compensable?

Not all work-related activities are considered compensable hours. For example, time spent on duty, engaged in a principal activity, or waiting on your company premises is generally paid, as the employee is either working or "suffered or permitted" to work.

What is a compensable work activity?

A compensable work activity refers to any time an employee is engaged in a principal activity that benefits the employer, such as working during on call time or waiting to be permitted to perform work. Generally, compensable time depends on whether the employee remains subject to the employer's control, even during activities like lunch breaks or when they return home overnight after working in another city or home community.