Go to Leave > Leave Settings > Leave Types > New Leave Type 

When the Add Leave Type window appears, ensure that the Is Compensatory Leave? option is checked.

Continue to set up the rest of the leave type's settings as required. See this article for more information on how to set up a leave type.

Once the leave type has been created, you will need to assign it to employees.

Then, your employees will be able to submit requests for compensatory leave by clicking on the Compensatory Leave Request button instead of the Apply Leave button.

Once their request has been approved, they will be able to click on the Apply Leave button to utilise their compensatory leave by selecting the relevant leave type.