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Comp Time

Compensatory time accruing at one and a half hours for each overtime hour worked

Comp time is paid time off given instead of overtime pay. Under the Fair Labor Standards Act only public agencies may offer it, it must accrue at one and a half hours per overtime hour, and it requires an agreement reached before the work is performed.

The reason this entry exists is that a great many private employers offer comp time anyway, believing it to be a flexible and generous arrangement. It is neither, because it is not lawful for them.

Who may offer it

29 U.S.C. 207(o) permits compensatory time in lieu of overtime, and its scope is narrow. It applies to a public agency: a state, a political subdivision of a state, or an interstate governmental agency. Private sector employers are outside it entirely.

For a private employer covered by the FLSA, overtime must be paid in money, at not less than one and a half times the regular rate, on the regular payday for the period in which it was earned. Substituting time off does not satisfy that obligation, and an employee's agreement to the arrangement does not make it lawful, because FLSA rights cannot be waived.

This is worth stating plainly because the arrangement is usually offered in good faith. An employer who lets someone take Friday off after a heavy week is not trying to underpay anyone. It is still a wage and hour exposure, and unpaid overtime accumulates quietly until someone raises it.

The rules where it is permitted

RuleRequirement
Accrual rateNot less than one and a half hours for each hour of overtime worked
AgreementUnder a collective bargaining agreement, or an agreement reached before the work is performed
Cap, public safety and emergency response and seasonal480 hours
Cap, all other work240 hours
Using itWithin a reasonable period after the request, if it does not unduly disrupt operations
On leavingPaid out at the higher of the average regular rate over the last three years, or the final regular rate

The accrual rate is the detail most often applied wrongly, even by employers entitled to use comp time. One hour of overtime does not earn one hour off. It earns an hour and a half, because the time is standing in for pay that would itself have been at one and a half times the rate.

The agreement must also exist before the overtime is worked. Offering time off afterwards, once someone has already worked the hours, does not meet the condition.

What a private employer can do instead

There are lawful ways to give people time back. None of them involve substituting time off for overtime already earned.

The first is the one worth understanding properly, because it is both lawful and the thing people are usually reaching for. It only works inside a single workweek, and the workweek is a fixed recurring period of 168 hours that the employer defines in advance.

It does not arise for exempt employees

Comp time is a question about overtime, and exempt employees are not owed overtime, so the concept does not apply to them. An employer may of course give an exempt employee time off after a heavy period, and that is simply a discretionary decision rather than compensatory time in the statutory sense.

One caution attaches even there. Docking an exempt employee's salary for partial day absences can defeat the salary basis test and make them non-exempt, which our entry on exempt vs non-exempt covers.

Key points

Frequently asked questions

What is comp time?

Compensatory time is paid time off granted in place of overtime pay. Under the Fair Labor Standards Act it accrues at one and a half hours for every hour of overtime worked, and it is available only to public agencies.

Can private companies offer comp time instead of overtime?

No. 29 U.S.C. 207(o) permits compensatory time only for public agencies, meaning states, political subdivisions of states and interstate governmental agencies. A private employer must pay overtime in money on the regular payday, and an employee's agreement to take time off instead does not make the arrangement lawful.

How much comp time does an hour of overtime earn?

One and a half hours, not one. The time off stands in for pay that would have been at one and a half times the regular rate, so the accrual rate carries the same premium.

Is there a limit on how much comp time can be accrued?

Yes. 480 hours for employees engaged in public safety, emergency response or seasonal activities, and 240 hours for all other work. Once the cap is reached, further overtime must be paid in cash.

What happens to unused comp time when someone leaves?

It must be paid out at the higher of the employee's average regular rate over the final three years of employment, or their final regular rate. It is not forfeited.

Can we let someone leave early later in the week instead of paying overtime?

Within the same workweek, yes, because overtime is calculated on each workweek separately and reducing hours keeps the weekly total below 40. Across a two week pay period it does not work: fifty hours in one week and thirty in the next is still ten hours of overtime.

Does comp time apply to exempt employees?

No, because exempt employees are not entitled to overtime in the first place. Time off given to an exempt employee after a heavy period is a discretionary decision rather than compensatory time in the statutory sense.

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