Time off given to employees in lieu of overtime pay, earned at 1.5 hours of leave for each overtime hour worked. Lawful for state and local government employees under the FLSA but prohibited for private sector employees.
Why comp time matters for employers
Compensatory time off in lieu of overtime pay is a widely misunderstood area of payroll law. Many private employers assume they can give employees time off instead of cash for overtime hours, often on a one-to-one basis. This is incorrect under the FLSA. The FLSA permits comp time arrangements only for state and local government employers. A public safety employee of a state or local government who works overtime may accrue comp time at 1.5 hours off per overtime hour, up to a cap of 480 hours accrued (240 hours for other government employees). The employee must be able to use that comp time within a reasonable period if the use does not unduly disrupt agency operations. For private sector employers, the FLSA requires overtime to be paid in cash in the pay period in which it was earned. An employer cannot tell a non-exempt employee who worked 45 hours this week to take 5 hours off next week instead of paying 5 hours of overtime. Even with employee agreement or a written policy, this arrangement violates the FLSA and exposes the employer to back-pay liability, liquidated damages, and penalties. What private employers can legally do is adjust schedules within the same workweek: if an employee works 10 hours on Monday and the employer reduces hours later in that same workweek so total hours do not exceed 40, no overtime is owed. The schedule flexibility must operate within the defined workweek, not carry over to the following week.
How BEG handles Compensatory Time (Comp Time) for clients
BEG Managed Payroll calculates and pays overtime in the pay period it is earned, which is the only FLSA-compliant approach for private sector employers. If your current payroll practice involves banking overtime and paying it as time off, BEG can help you correct the practice before it becomes a wage-and-hour claim. This compliance protection is included in BEG Managed Payroll at $25-$45 per employee per month. Learn about BEG Managed Payroll.
Frequently asked questions
Can a private employer offer comp time with employee consent?
No. The FLSA does not allow private sector employers to substitute comp time for overtime cash pay, even if the employee agrees in writing. Employee consent does not override the FLSA overtime requirement.
Can I adjust an employee's schedule to avoid overtime within the same workweek?
Yes. If an employee works long hours early in the workweek, you can reduce their hours later in that same workweek so total hours stay at or below 40. The adjustment must happen within the defined workweek, not carried to the next week.
How does comp time work for government employees?
State and local government employers may provide comp time at 1.5 hours off per overtime hour worked. Employees can accrue up to 480 hours for public safety roles (240 for most others) and must be permitted to use accumulated comp time within a reasonable period upon request.
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About the author
Anthony Moretti is VP of Sales at Business Executive Group, where he builds BEG's managed payroll and HR service verticals for employers across Dallas-Fort Worth and nationwide. He writes the BEG Payroll Glossary to give employers plain-English answers on payroll and compliance.
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