What is compensatory time off?

Glossary/C/Compensatory Time Off

Compensatory time off (CTO) is the paid time off given to employees who serve overtime or are at work on a holiday. It is a way of reimbursing employees and comes in handy when the employer does not prefer the concept of overtime pay.

CTO is calculated based on the number of hours worked. It is not mandated by law to give CTO to employees but most employers make it available as a way of keeping employees happy.

Not to be confused with:

PTO

Paid time off or PTO is an employee benefit through which an employer sanctions a pool of leaves for...

vacation

Vacation is the paid leave that employers grant to employees and these can be used for rest and/or any personal matters that need attention.

Not to be confused with:

PTO

Paid time off or PTO is an employee benefit through which an employer sanctions a pool of leaves for...

vacation

Vacation is the paid leave that employers grant to employees and these can be used for rest and/or any personal matters that need attention.

PTO

Paid time off or PTO is an employee benefit through which an employer sanctions a pool of leaves for...

vacation

Vacation is the paid leave that employers grant to employees and these can be used for rest and/or any personal matters that need attention.

PTO

Paid time off or PTO is an employee benefit through which an employer sanctions a pool of leaves for...

vacation

Vacation is the paid leave that employers grant to employees and these can be used for rest and/or any personal matters that need attention.

Paid time off is an employee benefit under which employers allocate a set of leaves to their employees and these can be availed at the employee’s convenience. Unlike CTO, paid time off is not given in place of overtime and is a benefit made available to all employees regardless of their hours at work.

Vacation is the paid leave that employers grant to employees and these can be used for rest and/or any personal matters that need attention. While both vacation and CTO are not mandated by law, vacations are meant to be leisure leaves and are given to employees to allow them some time to de-stress.

What exemptions are made while calculating compensatory time off?

Employers track the number of hours worked and use that as a basis to calculate the CTO for employees. So, if an employee works 10 hours overtime, they get 15 hours of CTO. However, the following exemptions are made while calculating CTO.

Employees who work less than 40 hours a week do not need to be given a CTO that is 1.5 days long. If an employee works for 20 hours and then works two hours overtime, they are eligible for only two hours’ CTO and not more than that.

As per federal law, most employees can not accrue more than 240 hours of compensatory time. Beyond 240 hours, the employer has to pay overtime.

If an employee resigns before using their CTO, they must be paid overtime.