Why federal employees weigh compensatory time against overtime pay

General Schedule (GS) employees in the United States federal civil service often must decide between accepting overtime pay or banking compensatory time off. The choice is more nuanced than it appears on the surface. Overtime pay adds immediate cash to a paycheck, but it is taxed and subject to Office of Personnel Management (OPM) caps that limit the hourly rate to the value earned by a GS-10 step 1 employee in the same locality. Compensatory time, by contrast, converts the extra hours into paid leave that can offset future burnout, childcare conflicts, or the need to attend appointments that rarely align with the workday. However, that banked leave expires if unused within 26 pay periods, and some agencies require managerial approval before time off can be scheduled. Because both options involve opportunity costs—lost cash today versus potentially lost rest tomorrow—federal employees rarely see a simple spreadsheet that combines OPM regulations, personal tax rates, and the time value of money. This calculator was built to fill that gap for acquisition specialists, contracting officers, analysts, and anyone else juggling irregular workloads.

The calculations also matter for supervisors allocating overtime assignments. When staff members understand the net value of the overtime shift they are being asked to work, they can negotiate for a mutually beneficial arrangement. Employees on the cusp of hitting the annual overtime earnings limit may prefer to bank comp time to avoid exceeding statutory caps, while those saving for a major purchase may accept the cash even at the capped rate. By quantifying the consequences of each choice, the tool encourages data-driven discussions instead of gut feelings or pressure to conform to team norms. Because the numbers are transparent, employees can explain their reasoning to family members, financial planners, or union representatives. That transparency is particularly important in agencies with cyclical workloads—such as fiscal year-end surge buying—where the choice between cash and leave may have to be made several pay periods in a row.

Turning OPM rules into formulas you can trust

OPM guidance defines overtime pay for General Schedule employees as one and one-half times the employee’s hourly rate of basic pay, subject to the GS-10 step 1 cap. To convert annual salary to an hourly figure, the federal government divides by 2,087 hours, representing the number of scheduled work hours in a year. If your annual salary is S and the locality-adjusted GS-10 step 1 annual rate is C, the overtime rate used in this calculator is

$R_{\mathrm{OT}}=\min \left(1.5\times \frac{S}{2087},\frac{C}{2087}\right)$.

This rate is multiplied by the number of overtime hours entered in the form to produce the gross overtime earnings. The net overtime value accounts for the marginal tax rate you provide, recognizing that supplemental pay is typically taxed at a combined federal, state, and payroll rate near 30 percent for many GS employees. The calculator also evaluates the value of compensatory time by multiplying the accrued hours by your personal valuation of time off. If you leave the valuation field blank, the tool assumes your hourly rate of basic pay captures the implicit value you place on a free hour. Because that time off is enjoyed in the future, the value is discounted according to the personal discount rate you enter. The present value $V_{\mathrm{CT}}$ of using comp time after $w$ weeks is expressed as

$V_{\mathrm{CT}}=\frac{H_{\mathrm{ct}}}{\times }{\left(1+r_{\mathrm{disc}}\right)}^{\frac{w}{52}}$, where $H_{\mathrm{ct}}$ represents the comp time hours earned, $V_{\mathrm{hour}}$ is the personal value per hour of leave, $p_{\mathrm{forfeit}}$ is the probability of forfeiture, and $r_{\mathrm{disc}}$ is the annual discount rate.

Federal rules require agencies to pay out compensatory time that is unused by the end of 26 pay periods (approximately 52 weeks) for employees who are exempt from the Fair Labor Standards Act. The payout uses the same overtime rate that would have applied when the time was earned. The calculator therefore models an automatic payout scenario at the week threshold you select, discounting the cash payment to today’s dollars and applying your tax assumptions. The break-even personal value per hour is also computed by dividing the net overtime cash by the number of comp time hours. If you value time off more than that figure, banking leave is financially rational even before accounting for health or family benefits.

Worked example: budgeting around a fiscal year-end surge

Imagine a GS-12 step 4 program analyst in the Washington-Baltimore locality earning $98,000 annually. The GS-10 step 1 rate in the same locality is $84,000, so the overtime cap reduces the analyst’s hourly overtime rate to $40.25 instead of the uncapped $70.43 that would otherwise apply. Management offers ten hours of overtime to meet a fiscal year-end deadline. The analyst knows her marginal tax rate is roughly 30 percent when federal, state, and FICA taxes are combined, and she expects to take the resulting comp time roughly eight weeks later to recover from the crunch. She assigns an intrinsic value of $45 to a free hour because childcare costs run $20 per hour and she values additional rest at $25 per hour. She estimates a 10 percent risk that she will have to forfeit the time due to an unexpected project.

The calculator determines a basic hourly rate of $46.95. Multiplying by 1.5 yields $70.43, which is trimmed to the $40.25 cap. Ten hours of overtime therefore generate $402.50 before taxes and $281.75 after taxes. Choosing comp time earns ten hours of leave (because the agency uses a one-to-one conversion). Discounting the leave back eight weeks at a 3 percent personal discount rate produces a present value of $443.88 when the $45 intrinsic value is applied and the forfeiture probability is considered. The automatic payout scenario assumes the analyst cannot schedule the leave within 52 weeks; in that case the eventual payout is discounted to a present value of $273.09 because the same $40.25 hourly rate is taxed and delayed a full year.

The worked example illustrates that even with the overtime cap compressing the cash payout, comp time is more valuable when the employee truly benefits from rest. If the analyst feared a 40 percent chance of forfeiting the leave, the present value would fall to $266.33, making cash overtime more attractive. Likewise, if her personal discount rate were 8 percent because she prioritized debt repayment, the present value of comp time would shrink to $416.91. The calculator surfaces those inflection points so the analyst can decide whether to accept the overtime, negotiate a different schedule, or ask to bank the leave for a future family commitment.

Comparing typical overtime decisions

The trade-offs vary widely across grades and personal circumstances. The table below summarizes three representative scenarios to illustrate how pay grade, intended use of comp time, and forfeiture risk interact.

Illustrative overtime decisions for GS employees

Profile	Net overtime cash	Comp time value (PV)	Key driver
GS-9 auditor banking time for CPA exam prep	$210 on 6 overtime hours	$268 when used in 4 weeks	Low forfeiture risk and high personal value per hour
GS-13 attorney covering trial prep late nights	$520 after taxes on 12 hours	$402 if leave is delayed 40 weeks	High overtime cap combined with delayed usage
GS-7 consular clerk saving cash for relocation	$175 on 8 hours	$150 when leave likely forfeited	High forfeiture probability makes cash preferable

These examples demonstrate that no single answer applies across the workforce. Employees studying for professional exams may value time off far more than immediate cash because the extra hours translate to better scores and long-term career growth. Attorneys or investigators working intense cases might find that comp time loses value if supervisors cannot release them for extended vacations until the docket clears. Newer employees with limited savings often prefer the cash even if they recognize the future fatigue cost, especially in high-cost regions where overtime caps do not drastically reduce rates.

Limitations and policy assumptions

While the calculator faithfully encodes OPM overtime formulas and common agency practices, it cannot replace official timekeeping systems or union agreements. Agencies sometimes negotiate alternative conversion rates for non-exempt employees, especially when travel comp time is involved. Bargaining unit agreements may allow comp time to convert to overtime pay at the end of the leave year instead of 26 pay periods. The tax model assumes a flat marginal rate and does not account for phase-outs, Social Security wage bases, or deduction limits. Additionally, the tool does not incorporate the impact of overtime earnings on retirement contributions, Thrift Savings Plan matches, or potential premium pay caps that apply to law enforcement officers and firefighters. You should verify numbers with your human resources office before making binding commitments, and remember that personal valuations of time off are inherently subjective. Even with those caveats, quantifying the cash and rest outcomes sharpens your ability to advocate for sustainable workloads.