Comp time, short for compensatory time off, is paid time off given instead of cash for overtime hours. Under the FLSA, only public sector employers may give comp time in place of overtime pay to non-exempt employees; private employers must pay overtime in cash.
Key takeaways
- Private employers can't substitute comp time for overtime pay for non-exempt employees.
- State and local government employers can, at 1.5 hours of comp time per overtime hour.
- Public employees can bank up to 240 hours, or 480 for public safety, emergency, and seasonal work.
- Exempt employees aren't owed overtime, so informal comp time for them is a policy choice.
How comp time works
The rule turns on who the employer is. A state, county, city, school district, or other public agency can agree with employees, or their union, to give comp time instead of overtime pay. Comp time accrues at one and a half hours for each overtime hour, and most employees can bank up to 240 hours. Police, fire, emergency response, and seasonal workers can bank up to 480. Once the cap is reached, further overtime must be paid in cash (DOL Fact Sheet 7, State and local governments under the FLSA).
Private employers don't have that option. If a non-exempt employee works 45 hours in a workweek, five hours of overtime pay at 1.5 times the regular rate must appear in that pay period. What a private employer can do is adjust hours within the same workweek, for example letting someone who worked 10 hours on Monday leave two hours early on Friday so the week totals 40.
For exempt employees, no overtime is owed, so giving a day off after a big launch is a goodwill gesture rather than a legal substitute.
Comp time example
A county road crew worker earns $28 an hour and works 48 hours during a storm week. Under the county's written comp time policy, she receives 12 hours of comp time (8 overtime hours x 1.5) instead of $336 in overtime pay. When she uses those hours later, she's paid at her rate at that time. If she leaves the county with 60 hours banked, the county must pay them out at the higher of her final rate or her average rate over the last three years.
A private construction company in the same county can't do this. The 8 overtime hours must be paid as $336 in the paycheck for that period.
Why comp time matters for employers
Comp time is one of the most common wage and hour mistakes at small private employers, often because a manager means well. "Take Friday off since you worked Saturday" sounds fair, but if Saturday pushed the employee over 40 hours, the overtime is still owed in cash. Back wages, an equal amount in liquidated damages, and attorney fees can follow.
The Department of Labor recovered more than $259 million in back wages in fiscal year 2025 (US Department of Labor, Wage and Hour Division FY2025 results), and unpaid overtime is a frequent cause. Time and attendance software that flags weekly overtime before payroll closes is the simplest protection.
Common comp time mistakes to avoid
Offering comp time to private sector non-exempt staff
It isn't allowed under the FLSA, even if the employee asks for it.
Banking hours at straight time
Public sector comp time must accrue at 1.5 hours per overtime hour.
Shifting hours across workweeks
Adjusting hours only works within the same workweek. Next week's time off doesn't cancel this week's overtime.
Not paying out comp time at separation
Public employers must cash out unused comp time when employment ends.
Comp time: questions people also ask
Is comp time legal for private employers?
Can salaried employees get comp time?
How much comp time can a government employee accrue?
Do states have their own comp time rules?
Is comp time the same as flex time?
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HRTally glossary entries are written by people who have run US payroll, benefits, and HR operations, then checked line by line against primary sources such as the IRS, Department of Labor, EEOC, and Bureau of Labor Statistics. Dollar limits and rates are for 2026 unless stated. We review every entry at least twice a year and whenever a rule changes. This page explains general rules and isn't legal or tax advice; state law can differ. Read our editorial standards.
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<blockquote>Comp time, short for compensatory time off, is paid time off given instead of cash for overtime hours. Under the FLSA, only public sector employers may give comp time in place of overtime pay to non-exempt employees; private employers must pay overtime in cash.</blockquote><p>Source: <a href="https://www.hrtally.com/hr-glossary/comp-time/">HRTally HR Glossary, Comp time</a></p>
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.