For nonprofit employers working within tight budgetary constraints, paying overtime can be a costly proposition. At the same time, many nonprofits must navigate natural workload ebbs and flows, and seasons in which there is an additional “push” where all employee hands on deck are needed. So, to many nonprofit employers, during those times when clocking extra hours is unavoidable, offering lieu time may sound like the perfect alternative to paying overtime.
Employees get the flexibility they’re looking for, and the organization has a cost-effective way to navigate the requirement to pay employees extra when they work longer than 8 hours a day or 40 hours a week. Sounds like a win-win solution, right?
Not so fast. If it sounds too good to be true, it’s probably because there is more to this story… While lieu time, otherwise known as flex time, banked time, or time off in lieu, does at first glance seem like a great solution to nonprofit organizations’ overtime pain point, it comes with its own set of challenges and specific rules that must be followed in order to comply with employment standards legislation.
What is lieu time?
Lieu time allows employees to track time worked in excess of their regular hours and take time off at a later date instead of receiving extra financial compensation. In short, it offers employees flexibility and allows for a “give and take” approach to work hours – employees are allowed to flex their schedules and nonprofit organizations don’t have to shell out more cash for the extra hours worked or put a formal averaging agreement in place.
The fine print
While the concept of lieu time seems simple enough and if administered properly it can be effective in keeping boards happy and budgets in check, there are some important points to know before you jump on the lieu time band wagon.
1. Lieu time, or a time bank, must be mutually agreed upon. That means an employer cannot force an employee to take lieu time instead of paying them for overtime. Even if lieu time is included as an option in your employee handbook, or is detailed in your employment contracts, employees can still request payment for overtime instead of receiving lieu time. Like an averaging agreement, establishing a time bank happens on an individual basis, so each employee should submit a written request agreeing to lieu time, so that the arrangement is properly documented.
2. Lieu time is earned at the rate it is accrued. That means if an employee works overtime, the time must be banked at the rate it would otherwise be paid. For example, if an employee who regularly works a 7-hour day works 10 hours one day, they have worked 3 extra hours. That means that they would bank 4 hours total (1-hour straight time and 2 hours at 1.5x their regular hourly rate, because time worked after 8 hours a day is still earned at 1.5x, even if it is being taken as time in lieu).
3. Lieu time should be tied in with your existing overtime policy. It’s important to put your lieu time policy in writing and put parameters in place to avoid confusion and disagreements over entitlements down the line. Your overtime and lieu time policy should specify what situations will and will not qualify for overtime and associated lieu time (Ex: travel time, extra hours spent to meet a strict project deadline, etc.).
4. You’ll need a solid system in place for tracking lieu time. Word to the wise: work out the administrative details beforehand. To avoid a giant headache down the road, put a solid system in place for tracking lieu time, and include detailed procedures in your lieu time policy. Instructions should cover off topics like:
- How to obtain pre-approval for overtime and associated lieu time
- How lieu time will be tracked
- How much lieu time can be accrued
- How to request to take lieu time
- The time frame that lieu time should be used within
The takeaway
Long story short — while lieu time can feel a workable addition to your overtime policy, if you’re thinking about offering lieu time as a perk instead of paying overtime, it is essential to take the time to ensure your existing policy considers and complies with legislative requirements, is communicated effectively to employees, and is applied consistently.
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