May an employer pay an exempt employee overtime or comp time?

Yes. Nothing prohibits an employer from compensating an exempt employee for working in excess of the employee’s regularly scheduled hours if it so chooses. It is not required to do so, however. This is purely a matter of employer choice.

Many employers pay exempt employees an hour-for-hour bonus for extra hours worked based on what the salary’s hourly rate would be. Others give exempt employees paid time-off on an hour-for-hour basis. There is no limit to the number of hours of paid time-off that an exempt employee may accrue. In contrast, the FLSA limits nonexempt employees to 240 hours of accrued comp time – 480 hours for public safety employees.

Employers should note that compensatory time for nonexempt employees must be cashed out at the termination of employment. Employers granting exempt employees paid time-off do not have to cash out accrued time off unless the employer’s policy requires it to do so.