Definition: Compensatory time (comp time) is paid time off that an employee earns instead of receiving cash wages for overtime hours. Under the FLSA, state and local government agencies may provide comp time to nonexempt employees under prescribed conditions, at a rate of at least 1.5 hours per overtime hour worked.
EZTime labor rule alerts flag overtime and missed rest periods before payroll.
Many employees have heard of comp time: work extra hours this week, take the time off later. The idea is simple, but the federal rules are narrow. Under the Fair Labor Standards Act, comp time in place of overtime pay is a specific arrangement available to public agencies. Private employers that “bank” overtime hours as future time off for nonexempt employees risk unpaid overtime claims.
DOL Fact Sheet #7, on state and local governments under the FLSA, explains that employees may receive compensatory time off instead of cash overtime pay under certain prescribed conditions. The key points from the fact sheet:
The comp time provisions described in Fact Sheet #7 apply to public agencies. For covered nonexempt employees generally, DOL Fact Sheet #23 requires overtime pay at not less than time and one-half the regular rate for hours over 40 in a workweek, and states that overtime earned in a workweek “must be paid on the regular pay day” for the pay period in which the wages were earned. It also states that employees cannot waive their right to overtime by agreement. Together, these rules mean a private employer generally cannot replace cash overtime for nonexempt employees with future paid time off.
Private employers sometimes use a related, lawful practice: adjusting hours within the same workweek. If an employee works 10 hours on Monday, leaving early on Friday so the week totals 40 hours avoids overtime under the federal 40-hour rule, because the FLSA measures overtime by the workweek. This is not comp time; it is simply scheduling within the workweek. State daily overtime rules may still apply.
Hypothetical (public agency): A county road maintenance worker earns $24.00 an hour and works 46 hours during a storm-response workweek. The county has a valid comp time arrangement.
| Item | Calculation | Result |
|---|---|---|
| Overtime hours | 46 − 40 | 6 hours |
| Comp time earned (at least 1.5x) | 6 × 1.5 | 9 hours of comp time |
| Cash value at current rate | 9 × $24.00 | $216.00 |
| Cash overtime alternative | 6 × $24.00 × 1.5 | $216.00 |
If the same worker already had 236 hours banked and the cap is 240 hours, only 4 more hours of comp time could be accrued; the remaining overtime would need to be paid in cash. You can check overtime amounts with the overtime calculator.
Hypothetical (private employer, incorrect): A private landscaping company tells a crew member who worked 46 hours that he will get 9 hours off next month instead of overtime pay. Under Fact Sheet #23, the 6 overtime hours, at time and a half, were due on the regular payday for that period. The future time off does not satisfy that obligation.
| Term | What it is | Who typically uses it |
|---|---|---|
| Compensatory time | Time off instead of cash overtime, accrued at 1.5x or more | Public agencies under FLSA rules |
| Paid time off (PTO) | Paid leave earned under an employer policy | Any employer; see paid time off |
| Same-week flex time | Rearranging hours within one workweek to stay at or under 40 | Any employer, subject to state daily overtime rules |
Requests for comp time usually come from a good place. An hourly employee who worked late during a busy week may genuinely prefer a Friday afternoon off to extra money. Managers who agree informally often think they are being flexible. The problem is that the arrangement shifts overtime pay out of the workweek in which it was earned and, for private employers, replaces cash the law requires with time the law does not recognize as payment. If the employee later leaves, disputes their hours, or complains, the employer may owe the original overtime regardless of the time off already given.
A better response for private employers is to offer flexibility within the same workweek when the schedule allows it, and to pay overtime in cash when it is worked. Employees who want more time off can be pointed to your PTO policy. Clear rules prevent well-meaning managers from creating liabilities, so include a short statement in the handbook and in manager training that overtime is paid, not banked.
Whether you pay overtime in cash or manage leave balances, the starting point is accurate weekly hours. EZTime tracks time through the GPS mobile time clock with geofencing, NFC tags, tablet kiosk, or biometric clocks, sends overtime and break alerts before employees pass 40 hours, and lets managers adjust upcoming shifts with AI shift scheduling and shift templates. PTO/absence management keeps leave balances organized, timecard corrections keep an audit trail, and payroll-ready Excel/PDF exports work with any payroll software. Learn about the attendance clock and see pricing, from $2/employee/month with a 14-day trial.
This is general information, not legal advice.
The FLSA comp time provisions DOL describes apply to public agencies. For other covered nonexempt employees, DOL says overtime earned in a workweek must be paid on the regular payday, and employees cannot waive overtime by agreement.
DOL Fact Sheet #7 says comp time must be earned at a rate of not less than one and one-half hours for each overtime hour worked.
Public safety, emergency response, and seasonal employees may accrue up to 480 hours; other state and local government employees may accrue up to 240 hours.
DOL says an employee must be allowed to use comp time on the date requested unless doing so would unduly disrupt the agency’s operations.