Under certain conditions, employees of federal, state, or local government agencies who irregularly or occasionally work overtime may receive compensatory time off—which is time off that is compensated—instead of receiving cash overtime pay. It is usually illegal for private sector businesses to compensate employees who are eligible for overtime pay (are nonexempt under the Fair Labor Standards Act) with compensatory time—often referred to as comp time.

Policies on compensatory time off in lieu of overtime pay vary between employees who are covered by the Fair Labor Standards Act (FLSA) and those who are exempt from it (usually executive, professional, and administrative employees). Exempt employees are generally not eligible to receive overtime pay. But whether an employee is exempt or nonexempt under the FLSA, the government employer (agency) may be able to approve comp time for an employee.

Compensatory time off in lieu of overtime pay generally must be used within 26 pay periods. If an FLSA nonexempt employee doesn’t take comp time within 26 pay periods, the employer may have to pay the employee for that overtime work at the overtime rate in effect during the pay period in which the overtime work was performed.

In Alaska, as in other states, compensatory time off (comp time) in lieu of overtime pay is regulated by the Fair Labor Standards Act (FLSA). For federal, state, or local government employees who occasionally work overtime, comp time may be granted instead of cash overtime pay. This is permissible under certain conditions, such as an agreement or understanding between the employer and employee prior to the performance of the work. However, for private sector employees who are nonexempt under the FLSA, it is generally illegal to provide comp time instead of overtime pay. Exempt employees, typically in executive, professional, or administrative roles, are not eligible for overtime pay and therefore comp time arrangements may differ. For nonexempt employees, any accrued comp time must be used within 26 pay periods or the employer may be required to pay for the overtime work at the overtime rate from the time it was earned. It's important to note that while these are federal guidelines, state or local laws may offer additional provisions regarding comp time.