Glossary definition

Managing time off in lieu: An employer’s guide

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Time off in lieu (TOIL) or money for overtime? That’s the question to answer when deciding whether to offer your employees TOIL. Read this article to understand what exactly TOIL is, the pros and cons and what to think about before making a decision.

Here’s what we cover:

What is time off in lieu?

TOIL is where you offer employees extra leave as an alternative to paying them for any hours they work beyond what they are contracted or scheduled to work. So, if your employee works overtime, they can get time off instead of being paid for the extra hours.

TOIL is accumulated when the employee works a specified number of hours in overtime.

You have a degree of flexibility when deciding how TOIL will work for your business. For example, you can choose to record TOIL separately from your employees’ annual leave or add it to the leave they’re entitled to for the year.

As an employer, you are not obligated to offer your staff TOIL. Your employees aren’t obligated to accept TOIL either.

If you do choose to offer TOIL, there needs to be no breach of the Working Time Regulations 1998. Also, your TOIL policy must be included in your employees’ employment contract.

How does time off in lieu work?

If you decide to offer TOIL to your employees, here’s a breakdown of how it works.

Firstly, TOIL is built up when an employee works more hours than they are contracted to. An example is if your employee is contracted to work 20 hours a week. If they work 22 hours in a week, the two extra hours worked can be taken as TOIL.

When your employee wants to take TOIL, they need to get approval from their manager. The request needs to be assessed to determine whether this would lead to unnecessary disruption of business activities.

If the employee gets the go ahead to take TOIL, it is deducted from the balance of their remaining TOIL.

When considering how TOIL works, you need to consider issues like taking breaks and not going above the amount of hours per week your employee is legally allowed to work. For example, you can’t allow your employees to carry over too much leave as TOIL if it’s going to lead to burnout.

The positives and negatives of offering TOIL

Although your employees aren’t entitled to receive TOIL by law, it’s important to consider how this could benefit your employees.

Here are some of the advantages of TOIL.

• More motivated employees: TOIL gives your employees the opportunity to take extra days off. This time could be taken to deal with life’s surprises or for rest and relaxation. This could make for happier and more motivated employees.
• More satisfied employees: as TOIL is tied to the amount of overtime hours worked, this gives your employees an incentive to help out when your business needs it. The reward of TOIL can lead to more job satisfaction.
• An increase in productivity: working overtime regularly can be tiring. Employees who have the chance to take TOIL to recharge their batteries may be more productive.

TOIL also has benefits for your business.

Overtime costs can quickly add up. If your employees have the option to take TOIL, you can make savings, which will have a positive effect on your staffing costs and your overall profit.

To decide whether offering TOIL is right for your business, it’s helpful to weigh up the pros and cons.

Here are some of the downsides of TOIL:

• If not managed effectively, TOIL can result in employees accumulating too much leave. This can lead to too many staff taking leave before the end of the year. You’ll then be left with the headache of making arrangements to prevent disruption of your business while most of your employees are away.
• Keeping tabs on the amount of TOIL earned can be difficult, especially when employees only work overtime occasionally. Managing TOIL manually can be time consuming.
• TOIL may not be welcomed by everyone. Given the choice, some of your employees might prefer to get cash for the overtime worked.

Time off in lieu policy: What to consider and include

After you’ve made the decision that TOIL is right for your business, it’s time to work on a policy that lays out the particulars.

Here are some things to consider and include when writing your TOIL policy in employment contracts and staff handbooks.

• You will need to think about the amount of overtime an employee needs to work before they can start to accrue TOIL. For example, in what minute time increments will TOIL be logged?
• Consider the smallest amount of TOIL your staff can take. Does the TOIL need to amount to a full day, half day or by the hour?
• Think about whether TOIL will be treated differently to annual leave or will they be bundled together?
• Lastly, are there any cut-off points for using the TOIL that has been accrued?

Your TOIL policy should include the following:

• Rules around when employees can earn TOIL. It should be clear that TOIL only applies to approved overtime.
• OIL is calculated on a like-for-like basis, i.e., two hours of overtime is equal to two hours of TOIL.
• Employees will get TOIL instead of overtime pay. They will not receive both.
• List exceptions to your policy, for example, if your business will be disrupted because of TOIL, then overtime pay may be offered as an alternative.
• How employees can check the amount of TOIL they have used and have left over.
• Who needs to approve a request for TOIL and the process that should be followed.
• The smallest increment of TOIL your business offers, i.e., hourly, half-day, or daily.
• Parameters around when TOIL needs to be taken, i.e., within 6 months. Specify what happens when TOIL isn’t taken within the stated period. For example, do they lose it or do they receive the monetary equivalent?
• Set a cap on the amount of TOIL that can be taken within a specific period. For example, 5 hours in a month. Also, explain what happens when your employees go over this limit – will they be paid overtime instead?
• If your employee leaves, what happens to their unused TOIL? Will the TOIL cash equivalent be in their final pay or would they be able to take their time off during their notice period?

Best practices for managing TOIL

Here are some best practices when using TOIL in your business.

• Communicate your TOIL policy to your employees at different stages. It should be included in their employment contract and handbook. Make it clear that they can ask any questions to clarify things they don’t understand about the policy.
• Make it easy for your employees to book TOIL. The process of checking and booking TOIL should be as smooth as booking annual leave.
• Keep detailed records and accurately track TOIL for each of your employees. This system should include pending TOIL requests as well as an easy way for managers to approve requests.

How using HR software can help to track TOIL

Whether you decide to record TOIL separately or include it in annual leave, you need HR software to automate and track TOIL for your employees.

Using HR software can help track TOIL to help you to keep the necessary records to remain compliant with the Working Time Regulations.

Efficient HR software can help you to identify irregularities with your TOIL process, for example, if a particular employee is abusing the scheme.

You can also use your HR software to monitor your labour costs in relation to TOIL and make the necessary adjustments.

Final thoughts

If you decide to provide TOIL to your employees, a solid policy will ensure they know how time off in lieu works.

Using HR software means there are no inconsistencies between how much overtime your employees have worked and how much TOIL they’re entitled to.

This leaves both your employees and your business to enjoy the benefits of TOIL without any additional administrative burden.