Compensatory Time Off (CTO) Definition

Compensatory time off is where employers offer employees paid time off for working overtime, in lieu of overtime pay or extra compensation.

Compensatory Time Off Extended Definition
Compensatory time off, or CTO, is the paid time off given to an employee instead of overtime pay. Some employees of state or local government agencies may receive comp time off. The FLSA dictates that non-exempt employees must be paid for all hours worked and cannot be given time off in place of pay.

Employers are allowed to regulate compensation by the FLSA by controlling the number of employee work hours.

To comply with FLSA’s requirements for CTO or overtime payment, employers must classify their employees as ‘exempt’ or ‘non-exempt.’ Exempt positions may be granted CTO, while non-exempt workers are entitled to overtime pay.

Last Updated By

Rachel Blakely-Gray | Feb 15, 2023

Check out Our Payroll Software

Starts at $17/month +$4 per employee (or 1099 contractor)
30-day free trial
Free USA-based support
Free Direct Deposit
Easy to use, but powerful
Very happy customers!

See a Demo