Many government employees work beyond regular office hours.
Deadlines move. Emergencies happen. Public service does not always stop at 5 p.m.
To manage this reality without increasing payroll costs, the government allows eligible personnel to earn time off instead of overtime pay.
This is done through Compensatory Overtime Credits and Compensatory Time Off, guided by CSC-DBM Joint Circular No. 2, series of 2004.
What Is CSC-DBM Joint Circular No. 2, s. 2004?
CSC-DBM Joint Circular No. 2, s. 2004 was issued by the Civil Service Commission and the Department of Budget and Management.
Its purpose is to:
- Support austerity and cost-saving measures
- Reduce overtime pay expenses
- Compensate extra work through time off instead of cash
The policy allows certain government employees to earn credits for authorized overtime work. These credits can later be used as paid leave.
What Are COC and CTO?
Compensatory Overtime Credit (COC)
COC refers to the number of hours earned by an employee who renders authorized overtime work.
Key points about COC:
- Earned instead of overtime pay
- Based on actual hours worked beyond regular schedule
- Applies to work on weekdays, weekends, holidays, or rest days
- Must be supported by proper approval
COC is not cash.
It is a time credit.
Compensatory Time Off (CTO)
CTO is the paid leave granted when an employee uses earned COC.
Important reminders:
- CTO is paid time off
- It is deducted from accumulated COC hours
- It cannot be converted to cash
- It must follow approval and documentation rules
Simply put, COC is earned time.
CTO is time you take off using those credits.
Who Is Covered by the COC and CTO Policy?
Coverage under the circular is specific.
Not all government workers are included.
Employees Who Are Covered
You may earn COC and avail CTO if you are:
- Permanent, temporary, or casual employee
- Contractual personnel with regular or supervisory duties
- Below the rank of division chief or equivalent
The key factor is position level, not employment status alone.
Employees Who Are Not Covered
The following personnel are excluded:
- Career Executive Service officials
- Elective officials
- Military and uniformed personnel
- Officials with rank of division chief or higher
These positions usually have fixed compensation systems that do not allow COC or CTO.
Why the Government Uses COC and CTO
Overtime work is sometimes unavoidable in public service.
However, paying overtime to all employees can heavily strain government funds.
COC and CTO allow agencies to:
- Recognize extra work
- Maintain fairness among employees
- Control personnel expenses
- Promote work-life balance through rest days
This system rewards effort without increasing payroll costs.
Authorized Overtime Activities
Not all overtime work automatically earns COC.
The activity must be necessary and officially authorized.
COC may be granted for overtime related to the following:
Project and Administrative Work
- Meeting urgent project deadlines affected by unforeseen events
- Preparation of annual budgets and financial reports
- Submission of reports required by Congress, DBM, or COA
- Preparation of agency performance and audit documents
Emergency and Disaster Response
- Disaster response operations
- Relief distribution
- Rehabilitation and recovery work
- Emergency coordination during calamities
Education and Examination Activities
- School registration and enrollment periods
- Graduation exercises
- Government exam preparation
- Checking, processing, and release of exam results
Essential Public Services
- Health services
- Transportation regulation
- Public safety and security operations
- Frontline services that require extended hours
Legal and Executive Support
- Legal services and case resolution
- Compliance with presidential directives with fixed deadlines
- Driver and staff support for officials working beyond office hours
Overtime must be justified, not routine.
Requirement for Overtime Approval
COC is not automatic.
An official office order is required.
The office order must state:
- Date or period of overtime work
- Specific time covered
- Purpose and nature of the activity
- Names of employees authorized
Without this order, overtime hours cannot be credited as COC.
How COC Is Computed
COC computation depends on the day the overtime work is rendered.
COC Computation Table
| Day Type | Formula |
| Weekdays or regular workdays | Overtime hours × 1.0 |
| Weekends, holidays, or rest days | Overtime hours × 1.5 |
Sample Computation
If an employee works:
- 2 hours overtime on a weekday
- COC earned = 2 hours
- 4 hours on a holiday
- COC earned = 6 hours
The higher rate recognizes work on rest days or holidays.
Issuance of Certificate of COC Earned
Before CTO can be used, a Certificate of COC Earned must be issued.
This certificate confirms:
- Total overtime hours rendered
- Approved COC credits
- Period covered
The certificate serves as the official basis for CTO approval.
Rules on Availing Compensatory Time Off
CTO is subject to clear limits and timelines.
Key CTO Rules
- CTO must be used within one year from earning the COC
- A Certificate of COC Earned is required
- CTO cannot be converted to cash
- CTO is granted subject to office needs
Supervisors may defer CTO if office operations will be affected.
What Happens to Unused COC?
Unused COC does not last forever.
COC may be forfeited if the employee:
- Resigns
- Retires
- Transfers to another agency
Because COC is non-monetary, it cannot be paid out upon separation.
Common Misunderstandings About COC and CTO
Many employees misunderstand how the system works.
Here are common errors:
- Assuming all overtime earns COC
- Rendering overtime without written approval
- Expecting COC to be paid in cash
- Delaying CTO until it expires
- Applying CTO without a COC certificate
Knowing the rules prevents lost benefits.
How Overtime Work Differs in the Public and Private Sectors
Overtime work exists in both the public and private sectors, but how it is compensated is very different. Understanding this distinction helps explain why COC and CTO exist in government service.
Overtime in the Private Sector
In private companies, overtime is usually paid in cash.
- Employees receive overtime pay based on labor laws and company policy
- Rates are often higher for night work, rest days, or holidays
- Overtime is treated as an added labor cost
- Payment is usually reflected in the next payroll cycle
For private employers, overtime is part of doing business. The company absorbs the added cost in exchange for increased productivity or meeting deadlines.
Overtime in the Public Sector
In government offices, overtime is handled more carefully.
- Public funds are limited and come from taxpayers
- Budgets are approved in advance and strictly controlled
- Not all agencies have funds for overtime pay
- Spending must follow national austerity and accountability rules
Because of these limits, overtime pay is not always allowed. Instead, eligible government employees earn Compensatory Overtime Credits, which can be converted into Compensatory Time Off.
Why Government Uses Time Credits Instead of Cash
The public sector focuses on continuity of service rather than profit. Using COC and CTO allows agencies to:
- Recognize extra work without increasing payroll expenses
- Ensure equal treatment across offices
- Prevent abuse of overtime claims
- Keep spending within approved budgets
This system balances employee welfare and responsible use of public money.
What This Means for Government Employees
For government workers, overtime is about service and responsibility.
Extra hours may not result in immediate cash, but they can be returned as rest time through CTO. When used properly, this gives employees time to recover while ensuring government operations remain efficient and accountable.
Understanding this difference helps set realistic expectations and prevents confusion when comparing government work with private-sector practices.
Tips for Government Employees
To maximize your earned credits:
- Confirm overtime is authorized in writing
- Track your overtime hours accurately
- Request your Certificate of COC Earned early
- Plan CTO before the one-year deadline
- Coordinate with your HR office regularly
Good documentation protects your earned time.
Why This Policy Matters to Employees
COC and CTO recognize the real demands of government work.
They give employees rest without harming public finances.
They promote fairness and accountability across agencies.
When understood and applied correctly, this system benefits both employees and the government.
Frequently Asked Questions
- Can COC be converted to cash?
No. COC and CTO are strictly non-monetary.
- Can contractual employees earn COC?
Yes, if they perform regular or supervisory duties and are below division chief level.
- Is CTO automatically approved?
No. CTO is subject to office needs and approval.
- What if I fail to use my COC within one year?
Unused COC expires and may no longer be used.
- Do night shifts automatically earn COC?
Only authorized overtime beyond the regular schedule qualifies.
Conclusion
CSC-DBM Joint Circular No. 2, s. 2004 provides a practical way to recognize overtime work without increasing payroll costs.
By earning COC and properly using CTO, eligible government employees receive fair compensation through rest and recovery time.
Understanding the rules helps you protect your earned credits and avoid unnecessary forfeiture.