Time Off in Lieu

A cost-effective way to pay employees working overtime with proportionate free hours or holidays is called time off in lieu (TOIL). Read on for UK's laws.
  • Author: Siva
  • Last updated: October 19, 2022
  • 5 Minutes
time off in lieu (TOIL) for overtime worked by employees in UK explained by Papershift

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Beyond the costs of recruiting, hiring, and training employees, payroll costs are one of the largest items on any businesses budget. That’s why more and more companies are offering time off in lieu as an option for their employees when dealing with overtime. 

But what exactly is time off in lieu and how can a small or medium-sized business implement it? We aim to answer these questions and many more in our complete guide to time off in lieu.

Let’s begin.  

What exactly is time off in lieu?

What is TOIL?
Time off in lieu (or TOIL as it is often informally referred to) is an alternative way of compensating employees when they perform overtime without the need for giving them extra pay

When an employee performs overtime in this situation, they will be given an equal (or sometimes enhanced) number of hours to take as a holiday. For many businesses that have a big project coming up followed by a slow period, it can be a cost-effective way to ‘pay’ for overtime hours without additional costs.

What are the advantages of time off?

There are many advantages to offering time off in lieu to employees. These include:

  1. It improves the work-life balance of staff and keeps them healthier and well-rested. 
  2. It prevents employers from having to pay excessive labour costs for overtime at busy times.
  3. It can help businesses attract more staff who see time off in lieu as an attractive perk.

What are the common disadvantages with time off in lieu?

As with all things in the workplace, there are some disadvantages to offering time off in lieu. These include:

  1. Time off in lieu is coveted by some employees but others will refuse to perform overtime if they don’t receive pay for the hours they work. This can lead to a low take up of overtime during busy periods.
  2. Time off in lieu could lead to situations where you don’t have enough employees to work when you need them.

Can time off in lieu be a problem?

Unfortunately, without careful management time off in lieu can cause issues, such as:

  1. Confusion over time off in lieu rules
  2. Abuse of the time off in lieu policy
  3. Overtime becoming normalised
  4. A build-up of time off in lieu

If employees are regularly having to work extra hours, it might be that the employer needs to consider whether they are adequately staffed. Perhaps there are productivity or efficiency problems that could be addressed through capability or absence management processes instead.

The most common issue with time off in lieu is managing the accumulation of leave and making decisions as to when employees can use their time off. TOIL can often create an administrative burden for an employer. In some cases, this could lead to claims of discrimination if the TOIL policy is applied unevenly.

How do I manage time off in lieu correctly?

To manage time off in lieu correctly, you need to make clear rules, setting up expectations and limits in ways that are verifiable and recorded. Here are a few tips to get you started:

Make clear rules and set them out in a policy

So that employees don’t end up overusing their time off in lieu, define limits clearly. Let them know how much TOIL they can take off in a month. They also need to know when hours expire and when they can be carried out.

This keeps businesses from having to have tough or uncomfortable conversations with staff. It also keeps TOIL to a reasonable level.

Make sure there is an approval process for time off in lieu

It’s important that staff are required to submit an application or ask for time off in lieu. This will prevent them applying it willy-nilly and abusing how many hours they can store up in lieu. 

The approval process should allow you to oversee TOIL. Rather than leaving it up to employees to figure it out or self-report, there should be an oversight that’s well-defined and understood. This ensures clear expectations and keeps employees from being disappointed. Make all-time in-lieu rules available in HR software, employee contracts, or workplace policies.

Put agreements in writing and be clear

Clarity is going to keep you from ending up in a stressful situation. Set your TOIL agreement in writing and be clear about it. Keep the compensations of time off in lieu transparent and visible in HR software or policy documentation.

Set expectations around time off in lieu so that your staff understand the process clearly. 

Limit when time off in lieu can be earned or taken

Limit time off in lieu during your busiest seasons to prevent staffing bottlenecks. You don’t want too many people on a simple project one week and then only a few of them on a major project another week. If you have scheduled or predicted a busy period, plan around that.

Have reliable time off in lieu recording method

A reliable way to record time off in lieu will pay off big later and make managing the process easier. If you keep track of who is working extra hours and when they’re doing so, you can prevent staff from taking advantage.

Managers are already overloaded and worried about extra admin tasks. A system to help them keep track of overtime and time off in lieu can keep them from hitting any roadblocks.

Is time off in lieu legal? 

According to the law, employers are not required to pay their employee’s overtime. Yet, it is generally considered a good professional practice to reward workers when they have worked overtime. In this sense, as long as employees are not forced into working extra hours against their will, time off in lieu is legal. 

If an employer does offer compensation for working overtime, it is up to them what the compensation is and up to the employee if they wish to commit to doing the overtime and receiving the compensation.

There are, however, very strict legal restrictions on how many hours employees can work and these must be respected. For example, under the UK Working Time Regulations, workers cannot work more than 48 hours extra without a written opt-out agreement in place. 

In conclusion

Time off in lieu is a great way to compensate employees for working overtime without adding extra payroll costs the business but it needs to be managed well for it to be successful.

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Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)