Compensatory off (comp off) policy: rules and best practices

Compensatory off (comp off) is a paid day off for an employee who worked on a weekly off or a holiday. A good comp off policy defines eligibility, the hours that earn a full or half day, approval, validity and encashment. It must also respect the law: for many workers, overtime pay or a compensatory holiday is a right, not a policy choice.

This guide covers designing and running a comp off policy. For how comp off sits alongside other leave types, see our guide to leave types in India, and for working hours and overtime, see attendance and overtime rules in India.

What is comp off?

Comp off is time off in lieu of work on a day the employee was not scheduled to work. It is credited as a leave balance in full or half days. Two things set it apart from earned leave:

• It is earned by an event, not by service. No weekly-off or holiday work, no comp off.
• It is short-lived by design. The point is to give the employee rest close to the extra effort, so most policies set an expiry.

When does the law require a compensatory holiday?

There is no single national comp off law. The obligations come from the law that covers the establishment and the employee's category.

• The OSH Code, 2020 (in force since 21 November 2025) says a worker shall not be allowed to work for more than six days in any one week. Where a worker loses a weekly holiday because the establishment or worker has been exempted, the worker must be given compensatory holidays of equal number within the same month or the two months that follow.
• State Shops and Establishments Acts require a weekly off for employees in shops, offices and commercial establishments. Many allow a weekly off to be substituted with another day, and several set rules for work on national and festival holidays, such as wages at a higher rate or a substitute holiday. The details differ from state to state and some state Acts have been amended recently.
• State holiday laws decide which holidays are compulsory and what happens when an employee works on one.

State rules under the Labour Codes are being notified progressively, so how the OSH Code and each state's Shops and Establishments Act fit together is still settling in places. Check the current position with the Ministry of Labour and Employment and your state labour department before you fix the policy, and build a location matrix if you operate in more than one state.

Comp off vs overtime pay: who gets which

The single most important design question is which employees are covered by statutory overtime. Under the OSH Code, a "worker" who works beyond the daily or weekly hours set by the appropriate government must be paid overtime at twice the rate of wages, and overtime needs the worker's consent. "Worker" excludes people employed mainly in a managerial or administrative capacity, and supervisors drawing wages above ₹18,000 a month or a higher amount the Central Government notifies.

Employee group	Statutory overtime at twice the rate	Role of comp off
Workers under the OSH Code (operators, technicians, clerical staff)	Yes, for hours beyond the prescribed limits	A compensatory holiday where a weekly holiday is lost; never a replacement for overtime wages
Employees under a state Shops Act with overtime rules	As the state Act provides	Substitute holiday as the Act allows, plus any overtime due
Supervisors above the wage threshold	Generally no	Comp off by policy is the usual recognition
Managerial and administrative staff	No	Comp off by policy, often with a cap

Classification follows actual duties, not the job title. If in doubt, treat the role as covered and take advice. For the overtime arithmetic, use our overtime calculator.

Designing the policy: the decisions to make

Decision	Common options	Watch out for
Eligibility	Grades or roles not covered by statutory overtime; all staff for holiday work	Covered workers still need overtime wages where due
Qualifying days	Weekly off, declared holiday, or both	Optional or restricted holidays usually do not qualify
Full day threshold	Hours worked at least equal to a normal shift, such as 8 hours	Use punched hours, not a self-declaration
Half day threshold	Typically 4 to 4.5 hours	Below the half-day threshold, no credit
Pre-approval	Manager approves the work before the day	Retrospective credit only by exception, with a reason
Validity	30, 60 or 90 days from the date worked	Statutory compensatory holidays have their own window
Encashment	Not encashable, or encashable on lapse or exit	Encashment cost and tax treatment
Monthly cap	For example, 4 days a month	A cap that blocks a statutory holiday is not allowed
Clubbing	May or may not be combined with earned leave	Sandwich rules if the policy has them

A common combination is pre-approval, 60-day validity, no encashment and a monthly cap of 3 or 4 days for staff, with a separate statutory route for workers.

Worked examples

Example 1: a manager working on a Sunday

Priya is a finance manager (managerial capacity, outside the "worker" definition). The policy grants a full day for 8 hours or more and a half day for 4 hours or more on a weekly off, with prior approval.

• Sunday 13 September 2026: punched 10:00 to 18:30, 8.5 hours. Credit: 1 day, valid until 12 November 2026 under a 60-day rule.
• Sunday 20 September 2026: punched 10:00 to 14:45, 4.75 hours. Credit: 0.5 day.
• Sunday 27 September 2026: punched 11:00 to 13:30, 2.5 hours. Credit: none.

Her comp off balance is 1.5 days. If she does not use the first day by 12 November 2026, it lapses unless the policy says otherwise.

Example 2: a worker who loses a weekly off

Ravi is a machine operator on monthly wages of ₹20,800, with 26 working days of 8 hours, so 208 hours a month. His ordinary hourly rate is ₹20,800 ÷ 208 = ₹100, and the overtime rate is ₹200.

The plant is exempted for a shutdown week and Ravi works all seven days, 8 hours a day. Suppose the applicable weekly limit is 48 hours. He works 56 hours, so 8 hours are overtime: 8 × ₹200 = ₹1,600, paid in the next payroll. Because he lost his weekly holiday under an exemption, he is also owed one compensatory holiday within that month or the next two.

Example 3: encashment on lapse

If a policy encashes lapsed comp off at gross ÷ 26, a gross of ₹78,000 gives ₹78,000 ÷ 26 = ₹3,000 a day, so two lapsed days pay ₹6,000 of taxable salary.

Holiday work vs weekly-off work

Treat the two differently, because the law often does.

• Weekly off. Its purpose is rest. For workers, losing one triggers the compensatory holiday rule above. For staff, comp off restores the rest day.
• National and festival holidays. Some state laws require higher wages, or wages plus a substitute holiday, for work on a compulsory holiday. A plain comp off may not meet that rule.
• Holiday on a weekly off. Decide whether a substitute holiday is given, and write it down.

Comp off for travel days

Travel on a weekly off is a common grey area. A practical rule set:

• Travel on a weekly off or holiday, on the company's instruction, earns comp off when travel time is at least the half-day threshold.
• Travel by choice, such as flying out a day early for convenience, does not.
• A day that combines travel and a client meeting counts as work, credited on the total hours.

Abuse patterns and how to stop them

Pattern	Control
Logging in for an hour on Sunday to claim a half day	Credit on punched hours against the half-day threshold
Retrospective claims at month end	Pre-approval required; exceptions need a reason and second approval
Manager and team member approving each other	No self-approval, and escalation for repeated credits
Sunday work that was not needed	Monthly cap and a report of comp off earned by team

Payroll and leave ledger treatment

• Credit as a ledger entry. Each credit should carry the date worked, hours, approver and expiry date. A comp off balance with no source is impossible to audit.
• Consume oldest first and lapse automatically on the expiry date, with a ledger entry.
• Keep it out of LOP logic. Approved comp off is paid leave. An unapproved absence on a comp off day the employee assumed they had is loss of pay under the normal rules.
• Pay overtime separately. Overtime wages for covered workers go through payroll in the month they are due, whatever happens to comp off.
• Decide the exit treatment. On resignation, an unused comp off balance either lapses or is encashed in the full and final settlement. Say which.

Because comp off is earned from attendance and spent as leave, it works best when attendance, leave and payroll share one ledger. For accrual and carry-forward of other leave types, see our leave management guide.

Sample policy clauses

Adapt these to your locations and take advice before adopting them.

1. Eligibility. Comp off applies to employees in grades M1 and above who are not covered by statutory overtime. Employees covered by statutory overtime receive overtime wages and compensatory holidays as the applicable law requires.
2. Approval. Work on a weekly off or declared holiday must be approved in advance by the reporting manager. Retrospective requests are accepted only within 3 working days, with a reason, and need HR approval.
3. Credit. Recorded working time of 8 hours or more earns one day of comp off. Recorded working time of 4 hours or more but less than 8 hours earns half a day.
4. Validity. Comp off must be used within 60 days of the date worked, after which it lapses. It cannot be encashed, carried forward to the next leave year or adjusted against the notice period.
5. Cap. No more than 4 days of comp off may be credited in a calendar month without the department head's approval.

Common mistakes

• Giving comp off instead of the overtime wages the law requires for workers.
• Classifying employees as managerial by title rather than actual duties.
• Crediting comp off on a self-declaration instead of recorded time.
• Letting balances live forever, which turns comp off into a second earned leave.
• Ignoring the state rule on work during compulsory holidays.
• Running a separate comp off spreadsheet that payroll never sees.

FAQs

Is comp off mandatory in India? Not as a general rule. Workers who lose a weekly holiday under an exemption must get compensatory holidays, and state laws set rules for weekly offs and holidays. Beyond that, comp off is a company policy.

Can we give comp off instead of overtime pay? Not for employees covered by statutory overtime. Their overtime must be paid at the rate the law requires. Comp off is the usual mechanism for managerial and other staff outside those provisions.

How long should comp off be valid? Most policies use 30 to 90 days, with 60 days a common middle. Statutory compensatory holidays for workers must be given within the month or the two following months.

Is comp off encashable? Only if your policy says so. Most companies make it non-encashable to keep the focus on rest. Any encashment is taxable salary.

Does a half day of work on Sunday earn comp off? Under most policies, yes, if the recorded hours meet the half-day threshold, typically 4 to 4.5 hours.

How NeevHR helps

NeevHR leave supports comp off as its own leave type, with every credit, use and lapse recorded in the balance ledger and an approval chain per type. Attendance records the hours actually worked against the shift, and approved overtime and LOP flow into payroll, while shifts and rosters hold weekly-off policies by group.

This article provides general information for educational purposes. Statutory rules, thresholds, rates and filing requirements may change; verify with the relevant authority or a qualified professional. Last reviewed: 06 Oct 2026.