Comp Time vs. Overtime Pay

Some employees are eligible to receive paid time off instead of overtime pay if they work extra hours for your company. It’s important to understand which employees you’re allowed to provide with comp time to ensure you remain compliant with state and federal regulations. Learn more about what comp time and overtime pay are, the types of employees eligible for comp time and the key differences between the two.


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What is comp time?

Compensatory time, or comp time, is paid time off (PTO) that employees earn instead of overtime pay when they work over 40 hours a week. Some organizations set up a comp time policy that offers employees PTO that’s equivalent to how much they’d typically receive in overtime pay. 


What is overtime pay? 

Overtime pay is additional payment given to employees who work over 40 hours a week. Employees receive a compensation of one and a half times their regular hourly pay rate when they complete overtime work.  

Related: How to Calculate Overtime Pay


What type of employee is eligible for comp time?

Whether an employee is eligible for comp time depends on factors like whether they work in the public or private sector, if they’re exempt or non-exempt and which federal or state laws apply within the company’s location. The Fair Labor Standards Act (FLSA) has specific rules and guidelines for whether companies can grant their employees comp time in lieu of overtime pay. Typically, government entities are the only organizations allowed to grant comp pay to employees. 

This includes agencies like: 

  • Law enforcement
  • Firefighters and other fire protection employees
  • Emergency response personnel 
  • Employees engaged in seasonal activities 

These employees are allowed to accrue up to 480 hours of comp time, while other employees working for state and local offices can accrue up to 240 hours. The Department of Labor states that under prescribed conditions, local, state or federal government entities can earn comp time at a rate of no less than one and a half hours for every overtime hour an employee works. 

Comp time can also only be given to exempt employees who earn at least $35,568 a year, don’t get overtime pay and receive an annual salary. Non-exempt employees are eligible for overtime pay, so FSLA typically doesn’t allow them to earn comp time to avoid accidentally stacking it with overtime pay. 

There are also certain laws that regulate when organizations can provide employees with compensatory pay and how much they’re able to give employees. Your state’s department of labor office should have the details and guidelines available to update yourself and ensure you’re remaining compliant. 


Why is it important to understand the differences between the two? 

It’s important to understand the key differences between comp time and overtime pay to ensure you’re properly following state and federal laws. This helps you avoid receiving any fines or experiencing other legal repercussions from the local, state or federal government. To make sure you’re correctly following these guidelines, reach out to the U.S. Department of Labor’s Wage and Hour Division, as they’re in charge of enforcing worker protection laws. 


Examples of when an employee would get paid comp time vs. overtime

State and government agencies can administer comp time instead of overtime pay if the employee and their manager mutually agree to that employee earning comp time on a certain day before that work week starts. 

For instance, if a government employee realizes they have a large project due in two weeks and knows they’ll be staying late and working extra hours on the week it’s due, they may come to an agreement with their employer allowing them to put in additional time that week and receive the day off on the following Monday. 

Another example of an employee earning paid comp would be if a non-exempt and exempt government employee work extra hours completing a complex group project together. The non-exempt employee would receive overtime pay for the additional hours of work. To ensure fairness between the two, the exempt employee would establish an agreement with their employer beforehand to receive a paid time off amount that’s equivalent to the overtime pay the non-exempt employee receives.

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