What is

Compensatory Time Off


Compensatory time off is also often called “comp time”. CTO is an employee benefit that compensates employees for working extra hours. Read the full definition.

In some cases, employers can offer their staff compensatory time off (CTO) in lieu of overtime payment. This can be an effective strategy to promote work-life balance and ensure fair compensation for your staff. 

What Is Compensatory Time Off (CTO)?

Compensatory time off is also often called “comp time”. CTO is an employee benefit that compensates employees for working extra hours. In lieu of overtime pay, employers may choose to give their staff extra time off work. 

How Does Compensatory Time Off Work?

The process of earning and using CTO may vary depending on an organization's policies and local labor laws. Normally, employees who work beyond their standard hours can either choose monetary compensation or additional paid time off. 

The accrual rate for CTO also varies. Sometimes it’s one-to-one, but frequently employers will give 1.5 or 2 times more hours off in lieu of those worked overtime. 

Employees can use their accrued compensatory time to rest at a later date. There are also usually rules about the maximum amount of CTO that an employee can accrue. 

Advantages of Compensatory Time Off

CTO can be a great benefit to offer to your staff, no matter where they are located. Employees will welcome the flexibility to balance their work and personal life, especially in industries with high and low seasons. Meanwhile, employers can save on overtime pay and offer higher flexibility to their staff, which fosters motivation and loyalty. 

  • Flexibility: CTO provides employees with increased flexibility to manage their time and address personal commitments without sacrificing their regular pay.
  • Work-life balance: By allowing employees to accumulate CTO, employers encourage a healthier work-life balance. This can lead to higher job satisfaction and productivity.
  • Cost savings: For employers, offering CTO can be cost-effective compared to paying overtime wages. This is especially true during busy periods when overtime work is common.
  • Improved employee morale: Offering CTO demonstrates an employer's commitment to employee well-being.
  • Boost to employee engagement: Employees who use their CTO to recharge and pursue personal interests tend to return to work feeling more engaged and rejuvenated.
  • Enhanced workforce management: CTO can be beneficial for employers to manage workforce fluctuations efficiently, avoiding excessive overtime expenses and potential burnout.

Legal Considerations

It’s critical to remember that not all jurisdictions may allow employers to offer comp time. In some countries, overtime pay is the only way to compensate employees for working beyond their standard hours. In others, there may be legal requirements or limitations to CTO policies.

Ensure Global Compliance with Borderless 

At Borderless, we make sure that you manage and pay employees anywhere in compliance with local laws and regulations. Book a demo now to find out how we can help you grow your business.