written by | September 28, 2022

What is Compensatory Off Leave? Rules & Policy Details

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According to Indian labour laws, employees should not work seven days a week. According to the factory's act, employees must work 48 hours per week and/or get one or two days off. If an employee works more than 48 hours, they are entitled to double the standard amount of overtime compensation. In exceptional cases, employees may be required to work on weekends, national holidays, and weekly rest days. Workers who lost their weekly rest days as a result of an organisation receiving an exemption under section 52 of the Factories Act shall be given compensated rest days within the next two months. 

Did you know?

According to the factory's law, the employer must ensure that no employee works more than ten days straight without a 24-hour break period.

What is Compensatory Leave? 

Compensatory time, commonly referred to as compensatory leave, is an overtime payoff granted to employees in return for working overtime. Under certain situations, paid time off should be given at a rate equal to 150% of the additional hours (generally referred to as time and a half). In other cases, the leave could be similar to the number of hours worked. For example if an employee has to work on Public holidays and weekends, he/she is entitled to a compensatory leave day. There is, however, generally a limited amount of time under which the employee can avail this leave. This limit depends on company to company. There is no prescribed amount of days required for this by the Indian government; the organisation determines the cap. The majority of businesses favour offering compensatory time off for up to 30 days. 

Also read: Gross Salary Vs Net Salary - Important Differences Between Gross and Net Salary

Is Compensatory Leave Legal? 

The situations by which the compensatory leave may be employed are specified in the factory's law. When extended to eligible workers, compensatory time is lawful. Usually (depending on various state legislations), private businesses are not allowed to substitute compensatory time for overtime compensation for non-exempt workers. 

Eligibility for Compensatory Leave

There are four primary groups of workers that are qualified for compensatory leave under the factory’s law: 

  • Public sector workers. These include the ones employed by the central or state governments. 
  • Salary-paying (exempt) personnel. 
  • Non-exempt workers who put in fewer than 40 hours a week, such as during a vacation week when they are compensated for leave but don't take one, are not free from overtime pay. 
  • Workers in some states of India (Andhra Pradesh, Maharashtra, Karnataka, Uttar Pradesh, Rajasthan, Tamil Nadu, Gujarat, West Bengal)

Compensatory Leave Usage 

Compensatory leave has advantages for both workers and businesses. Employees could like the option of working long shifts one week while saving up more paid time off for a future date. Employers could appreciate the improvement in employee morale. This also allows workers to plan extra hours during busy periods. 

Here are a few typical instances of how compensatory time is used. 

Government agencies: 

Instead of receiving overtime compensation, central and state government workers may be eligible for compensatory time off. State rules differ, but central law (section 52 of the Factories Act) mandates that for every 1 hour of overtime worked, employees must be given 90 minutes of compensatory time within the next 2 months. The compensatory time must be used during the same payroll period as the overtime is accrued according to the law. 

Private Companies: 

The policy for compensatory leave may vary from company to company. As there is no central law mandating compensatory off on private businesses, they can frame their own policies on compensatory leave. As long as the policy is applied fairly throughout the business, each firm can decide how to implement it. 

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Holidays:

Staff who work on a corporate holiday, whether exempt or not, may occasionally take a day off instead of pay. In essence, this converts paid time off for holidays into compensatory time. 

How to Draft your Compensatory Leave Policy 

Before adopting compensatory time, a compensatory leave policy must be established. It is easier for both employers and employees to grasp expectations when policies are written and conveyed. 

When drafting compensatory leave policies, public companies must meet additional criteria. For instance, the organisation and the association must agree to the compensatory time policy if a union is included. Otherwise, the compensatory time policy must be agreed to before the overtime hours, not after they have been worked. 

Eligibility: 

As you decide who qualifies for compensatory leave, take into consideration the existing legal limitations. All exempt workers who put in more than 40 hours a week will receive compensatory time from you. Will these workers require permission in advance to clock in compensatory time? Will non-exempt employees' qualifying requirements be different from those of exempt employees? 

Calculation: 

Establish the payment method for the compensatory leave. Will you provide compensatory time at an hourly rate or another price? How you'll record compensatory time is a further concern in this situation. Is it a component of your computerised HR software? Do specific supervisors keep tabs on it for their immediate supervisor? 

Parameters: 

Set restrictions on how you utilise the compensatory time. How long may workers use their compensatory time? Would there be a limit on how many hours of compensatory time someone may accumulate? Exist any limitations on when compensatory time may be used? 

Review and Training: 

To be sure you effectively achieved the goal within the legal parameters of your jurisdiction, record your policy and go through it with legal assistance. To guarantee that the approach is used effectively and equally throughout the company, educate your management on it. 

How to Calculate Compensatory Leave 

The policy you create will significantly impact how compensatory leave is determined. 

  • Public Agencies 

Public sector workers who work for the central or state administrations will collect compensatory time at a rate of 1.5 times the number of extra hours they put in. For instance, an employee who puts in 10 hours of overtime is subject to 15 hours of compensatory time. 

  • Private Companies 

compensatory time may be granted to exempt workers who are not generally eligible for overtime compensation by business policy. Companies can choose how they will compensate employees for overtime hours performed, whether it be an hour for an hour or a time and a half. 

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Conclusion 

The compensatory-off structure functions effectively in terms of mental health and medical treatment. The notion of receiving leave as compensation for excessive effort is frequently a source of positive incentive for the employee. The fact that the employees are content and productive also helps the company's credibility. This promotes an excellent work-life balance and encourages workers to be more productive throughout the workday. Contrary to the statistical analysis, compensatory offs have several advantages. Due to increased worker productivity, companies are spared from paying additional overtime wages. By receiving an extra day off, the individual may continue to balance their personal and professional lives. 

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FAQs

Q: What is Flexi leave?

Ans:

When employees take flex leave, they are not on any specific type of leave but work fewer hours than usual on any particular day. A period of flex leave might well be utilised at the start or end of another holiday.

Q: What is privilege leave?

Ans:

Privilege leaves are earned holidays that the corporation credits to staff. These days off are available for vacations, personal time, marital leaves, and medical situations. Due to the length of these absences, you must request a minimum of 3 days of holiday leave 7–14 days before the date.

Q: Do we get paid for compensatory off?

Ans:

At its foundation, the notion of compensatory-off compromises the overtime compensation for qualified personnel. As per the standard regulations, the employees must be compensated on a time-and-half system, which means that the compensating income must be provided at 1.5 times the employee's present wage.

Q: Can I use my compensatory off during the notice period?

Ans:

If a person leaves their job within the allotted 30 days and there are 5 compensatory days left in their leave accounts, they cannot use their compensation throughout the notice period. The only option for making up the difference in the notice period is to use PL. It will expire if the compensatory off is not used within the allotted time.

Q: What do you mean by compensatory off?

Ans:

The term "compensatory leave" (also known as "compensatory off," "comp off," or "comp hours") refers to the right of staff members to take paid time off in place of overtime compensation if they have served in unusual conditions, such as holidays, extra hours, on a day off from work.

Q: Who is eligible for compensatory off?

Ans:

Only employees who put in at least 40 hours the previous week will be granted compensatory time off. Employees may take "half" of a Compensatory Off day if required to work an additional 3 hours (or perhaps more) after their usual work time on a given day.

Q: What is the rule of compensatory leave?

Ans:

The number of days an employee would work on Sunday(s) or perhaps a holiday will determine how many days of compensatory leave they are entitled to. The Director must give such compensatory leave beforehand; however, it will be classified as casual leave

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.