Comp time, short for compensatory time, is paid time off credited for extra work instead of an immediate overtime payment under an applicable arrangement. It is not an option every employer can offer. A private employer cannot replace overtime owed under the federal Fair Labor Standards Act (FLSA) to a covered, nonexempt employee with a bank of time off for a later week. Qualifying state and local public agencies have a separate FLSA framework, generally crediting at least 1.5 paid comp-time hours for each overtime hour. See the federal definition of FLSA comp time and the state/local statutory provisions.
The useful payroll check has two parts: establish which rules cover the job, then trace either the overtime payment or the properly earned leave credit. A line called “COMP” does not establish that the arrangement is lawful. This U.S. guide reviews the federal distinctions as of October 20, 2026; state law, a collective bargaining agreement, and the actual employment arrangement can add requirements.
Who can receive comp time instead of overtime pay?
Start with the employer and the employee's actual overtime status. “Hourly” and “salaried” are pay methods, not complete exemption tests. The Department of Labor's exemption overview explains that a job title alone does not decide the result; the applicable requirements must be met. Our guide to overtime for salaried employees explains that distinction.
On a small screen, scroll the comparison table sideways.
| Employment setting | Federal starting point | Record to request |
|---|---|---|
| Private employer; covered, nonexempt employee | Required FLSA overtime cannot be replaced with later paid leave. | Worked hours, regular-rate calculation, and cash overtime earnings. |
| Qualifying state/local public agency; eligible employee | A valid FLSA arrangement can provide paid comp time instead of cash overtime. | Applicable agreement, overtime hours, credits, uses, and balance. |
| Employee actually exempt from FLSA overtime | Extra time off may be a benefit under a separate policy, rather than satisfaction of an FLSA overtime debt. | Classification basis, leave policy, and applicable state or contract rules. |
| Federal employee | OPM and the applicable federal pay rules govern; do not import the state/local formula. | Agency authority, earning rate, time limit, and payment rules. |
The state/local alternative in 29 CFR 553.21 is limited to the public agencies described there. Doing government contract work does not by itself make a private company a public agency; DOL Fact Sheet 7 expressly distinguishes them. A private employer's handbook or an employee's preference does not waive a covered worker's required overtime payment.
For an employee who really is overtime-exempt, 29 CFR 541.604 allows certain additional compensation, including paid time off, while preserving the required salary arrangement. That does not turn a misclassified employee into an exempt one or settle state-law leave and payout rights.
What must a state or local agency check before banking overtime?
For a new FLSA comp-time arrangement, the agency needs an agreement or understanding before the work is performed. Where employees have a representative, the arrangement is made with that representative; otherwise it is with the individual employee. The agreement regulation, 29 CFR 553.23, also addresses voluntary acceptance and keeping a record when the understanding is not written. An after-the-fact decision to rename unpaid overtime is not that process.
- Identify overtime under the correct rule. The ordinary federal rule uses more than 40 worked hours in a workweek, but some public-safety employees have special work-period rules. Do not apply the ordinary example below without checking the employee's arrangement.
- Check the earning factor. FLSA comp time under this state/local framework is earned at no less than 1.5 hours for each overtime hour, not one hour for one hour.
- Monitor the bank's cap. The general limit is 240 accrued comp-time hours. Qualifying public-safety, emergency-response, and seasonal activities can use a 480-hour limit. The work performed matters; a title alone cannot create the higher limit. See 29 CFR 553.24.
- Arrange payment when the limit is reached. Under section 553.21, additional overtime must be paid once the applicable maximum has been accrued. The cap is not permission to delete earned hours.
Those limits measure banked leave hours, not the original overtime hours. At the minimum 1.5 earning factor, 160 overtime hours generate 240 comp-time hours. The definition regulation makes that distinction. An agency's applicable agreement or state requirements may call for a lower operating limit or other protections.
How do you calculate cash overtime versus comp time?
Fictional comparison: assume a covered, nonexempt employee works 46 hours in one workweek. The employee has one $22 hourly rate, also the overtime regular rate. There are no bonuses, differentials, other earnings, special overtime arrangements, or additional state requirements in this example. The six overtime hours are 46 − 40.
For the private-sector cash-pay case, the full overtime rate is $22 × 1.5 = $33. Six hours × $33 = $198 in gross overtime earnings. Regular earnings are 40 × $22 = $880, making total gross wages $880 + $198 = $1,078 before deductions. These figures use the ordinary method explained in DOL Fact Sheet 23.
For a separate eligible state/local employee with a valid arrangement using the minimum earning factor, six overtime hours × 1.5 = nine paid comp-time hours. Those nine hours are a leave credit instead of the immediate cash overtime payment. They are not $9, nine additional worked hours, or $198 already deposited. This comparison assumes the agreement calls for the full overtime obligation to be met through comp time; lawful mixed cash/time arrangements also exist under section 553.23.
If the employer pays straight time for all worked hours and adds a separate overtime premium, read both lines before comparing totals. Our straight-time pay guide explains that presentation. Do not add a full overtime amount twice, and do not use a leave balance to fill an unexplained cash-pay gap.
Is a shorter day in the same workweek the same as banked comp time?
No. Adjusting a schedule before the employee exceeds the applicable overtime threshold is different from replacing overtime already owed with future leave. Under the ordinary FLSA rule, each workweek stands alone; 29 CFR 778.104 prohibits averaging across multiple weeks.
For example, 10 hours worked Monday, eight Tuesday through Thursday, and six Friday total 40 hours. Under the ordinary federal weekly test, that schedule alone does not produce weekly overtime. But 46 worked hours in week one and 34 in week two still leave six overtime hours in week one. A biweekly total of 80 does not erase them. See how to check overtime on a biweekly pay stub.
A state daily-overtime rule, a different applicable work period, or a more generous agreement may change the result. This is a weekly-rule illustration, not a recommendation to rearrange recorded time. The timecard should continue to show when the work actually occurred.
How should you check comp time on a pay stub or leave statement?
Separate earned leave, used leave, cash earnings, and cash-outs. A payroll abbreviation is not a universal definition. Ask whether an entry such as “COMP EARN” reports original overtime hours or leave hours after multiplication, and whether “COMP USED” records paid absence. A balance may appear in a separate leave system rather than on the earnings statement.
For covered public-agency FLSA comp time, 29 CFR 553.50 requires records of hours earned and used, hours paid out with amounts and dates, and the applicable agreement or understanding. These are recordkeeping obligations, not a requirement that every pay stub use the same labels or display the entire ledger.
A useful reconciliation is: closing bank = opening bank + credited hours − hours used − hours cashed out, with any separately explained corrections. Keep every term in hours. Compare the cash-out's dollar amount with the earnings section separately.
In that fictional ledger, 18 + 9 − 5 = 22 hours. If nine credited hours already resulted from six overtime hours × 1.5, do not multiply the nine again. If five hours were used, trace their paid-absence treatment without counting those same hours as work performed.
Paid leave generally does not count as hours worked for the ordinary federal weekly overtime test. Section 553.26 addresses payments for comp time used when discussing the overtime regular rate. Our PTO and overtime guide explains the worked-time distinction; an applicable agreement may provide a more generous calculation.
Can an agency deny use, erase hours, or refuse a payout?
For state/local FLSA comp time, an employee who requests use must be allowed to use it within a reasonable period if that use would not unduly disrupt agency operations. 29 CFR 553.25 says ordinary inconvenience is insufficient to deny a request. That standard is more specific than either “take any day automatically” or “approval is entirely discretionary.” Keep the request and the agency's response.
Do not assume a general PTO expiration rule can simply wipe out this statutory bank. Ask which hours are FLSA comp time, which are a separate benefit, and whether a reduction represents approved use, a cash-out, or a documented correction.
Cash-out rules also depend on timing. Under 29 CFR 553.27, payment for unused state/local FLSA comp time during employment uses the regular rate when payment is received. At termination, the rate must be at least the higher of the final regular rate or the average regular rate during the last three years of employment; the regulation addresses shorter employment periods too.
Fictional termination calculation: with 22 unused hours, a $23 final regular rate, and a verified $24 average regular rate for the relevant period, the minimum gross payout is 22 × $24 = $528. The original rate when the leave was earned does not automatically control that separation calculation. These are assumed regular rates, not a formula for deriving an employee's actual average or a net-payment estimate.
Do federal employees also earn 1.5 comp-time hours?
Do not apply the state/local example automatically to federal employment. The Office of Personnel Management's comp-time fact sheet describes a different federal framework, including one hour of comp time for each overtime hour and rules on eligibility, use within 26 pay periods, and payment or forfeiture that depend on the governing provisions and exemption status.
Federal employees should ask their agency which authority applies to the specific bank. A rule for federal overtime comp time is not automatically a rule for travel comp time, credit hours, a private employer's benefit, or a state/local FLSA bank.
Common comp-time questions
Is comp time the same as PTO?
Both can provide paid absence, but they need not be earned or governed the same way. Vacation or general PTO may accrue under a leave policy, while state/local FLSA comp time is tied to qualifying overtime. Keep the balances separate unless the records clearly preserve the relevant rights. For ordinary leave-ledger terms, see how to read a PTO balance.
Can I choose time off if I prefer it to overtime money?
A preference does not let a covered, nonexempt private employee waive required FLSA overtime. For an eligible public-agency arrangement, check the governing agreement and rules rather than assuming an unrestricted choice on every paycheck.
Does a comp-time credit increase the amount deposited now?
A leave credit alone is not a cash earnings payment. Paid leave when taken, or a later cash-out, is a separate payroll event to reconcile with earnings and deductions. Ask for both the leave ledger and the pay calculation before comparing the bank balance with a deposit.
What should you ask payroll if the records do not reconcile?
- Identify the work period. Collect daily time records, the employer's workweek boundaries, and the affected pay stub.
- Confirm coverage and the arrangement. Ask which overtime classification and legal authority apply, and request the comp-time agreement or benefit policy.
- Trace the units. Separate overtime hours worked from multiplied leave credits, paid absence, and cash earnings.
- Reconcile the bank. Check the opening balance, earned hours, uses, cash-outs, and corrections against the closing balance.
- Request the explanation in writing. Keep the original records and any revised statement or ledger.
A focused request can read: “For the workweek ending [date], my time record shows [hours] worked. Please identify the applicable overtime rule and any comp-time agreement, explain the cash overtime or leave credit, and reconcile the opening balance, hours earned, hours used, and closing balance. Please also explain any cash-out rate or adjustment.”
If a correction is needed, follow our pay-stub correction checklist. If the employer's explanation leaves required overtime unpaid, the Wage and Hour Division's complaint guidance explains how to raise a federal wage concern. A corrected-looking document cannot substitute for correcting the underlying wage payment or leave ledger.