Time Off In Lieu Explained: TOIL Benefits, Implementation and Process

In the UK, Time Off In Lieu, commonly referred to as ‘TOIL’, can be a valuable way to offer your team more flexibility in their working hours and help you manage busy periods without having to pay overtime.

But it’s important to manage time off in lieu effectively. Without a TOIL policy, you risk masking staffing issues and employee burnout, along with potential compliance issues linked to the National Minimum Wage.

In this guide, we’ll go through what TOIL is, the benefits and drawbacks of it, and how you can create a TOIL policy to manage it correctly.

What is Time Off In Lieu (TOIL)?

Time Off In Lieu, or TOIL, is when you give your employees compensatory time off when they work extra hours, instead of overtime pay. The amount of TOIL you give your employees is usually equivalent to the number of extra hours they worked.

You can choose to allow your employees to build up their TOIL over weeks or months, for example, so they can take a whole day off. Some businesses choose to add TOIL to an employee’s annual leave allowance. However, you need to consider the risk of staff burnout if you do this. Some employees may try to work lots of extra hours to build up their annual leave to take at a later date, which can lead to them struggling with work-life balance.

TOIL is a type of paid leave, even though it might not seem like it. This is because you give your employees leave instead of paying them for the additional hours they’ve worked.

Here’s a time off in lieu example:

Sam is contracted to work 37 hours per week. However, it’s month-end, so there are lots of reports to be done. She works an extra hour from Monday to Thursday, totalling 4 additional hours for the week.

The following week, Sam takes a half-day on Friday, giving her the 4 hours that she worked back without any need for overtime pay.

Benefits and limitations of TOIL for businesses

There are many good reasons why you might want to consider using time off in lieu in your business, but it’s also important to be aware of the potential downsides so you can put plans in place to mitigate them.

Benefits of TOIL

• Reduces costs: Overtime can be expensive, particularly when your employees might have clauses in their contracts that entitle them to time and a half or even double pay. By giving employees time off instead of paying them for their overtime, you can keep your labour costs under control.
• Promotes work-life balance: Offering TOIL helps employees take time off when they need it, whether it’s for personal appointments, hobbies, or simply to recharge. According to a CIPD report, 80% of employees say that working flexibly has had a positive impact on their quality of life. 
• Helps you spot excessive workloads: If you notice that the same employees are working extra hours regularly, it can indicate that their workload is too high. Spotting this early can help you make informed hiring decisions and prevent your employees from burning out.
• Boosts productivity: There’s evidence to show that implementing flexible working practices like TOIL, helps employees feel rested and more satisfied with their jobs, leading to higher productivity when they’re at work. 85% of businesses report increased productivity with flexible work policies.

Drawbacks of TOIL

• It won’t work when there are staffing issues: If your employees are constantly having to work extra hours, it’s unlikely that they will be able to take the time off in lieu. TOIL works best when employees work extra hours to cover temporary busy periods, rather than as a way to prevent you from hiring more staff.
• Employees can build up a lot of leave: If you allow your team to accumulate their TOIL over the year, they can end up with a lot of leave to take. If they don’t take it throughout the year, and they don’t use their annual leave either, you can end up short-staffed as the year ends and everyone tries to take their holiday.
• Can lead to staff burnout: In busy periods where your team work a lot of extra hours and don’t have the time to take their TOIL, there’s a risk of burnout. 48% of employees say that overtime contributed to their burnout, so it’s important to manage TOIL and staffing levels, so your team can keep a good work-life balance.
• Some employees prefer to be paid: While lots of employees value having more time off, many would prefer to be paid for the extra hours they work. If you’ve historically paid overtime but want to move to a TOIL policy, you may need to have a transition period between the two (and maybe even consult with them!).

Time off in lieu vs overtime: which is best?

In most cases, time off in lieu is better for the business than overtime. There are lower costs as you don’t have to pay your staff extra, and it works well for short-term busy periods. However, it can demotivate employees who value more money over more time off.

How to manage time off in lieu

To make TOIL a success in your organisation, you need to have a robust process in place. If TOIL isn’t managed properly, you risk confusing your employees (if it’s not applied consistently) and burning out your team. Here are some practical ways to manage TOIL effectively:

Put a policy in place

A clear TOIL policy is essential to help everyone understand the rules. Your policy should cover who is eligible for TOIL, how and when TOIL can be taken, any limits on how much TOIL can be accrued, and what happens to untaken TOIL (for example, whether it can be carried over or paid out). It should also set out whether TOIL needs to be approved in advance and who will approve it.

Without a policy, it’s difficult to ensure TOIL is applied consistently across the organisation, which can lead to lower employee morale.

Be aware of National Minimum Wage and Working Time Regulations implications

When offering TOIL instead of overtime pay, there’s a risk of some employees’ average hourly rate falling below the National Minimum Wage.

It’s illegal to pay someone less than the minimum wage, so you must ensure that you have a plan in place to monitor your employees’ hours in case they are at risk of working for less than the National Minimum Wage.

You also need to keep the Working Time Regulations in mind. Unless your employees opt out, they must not work over 48 hours per week, averaged over 17 weeks. If they are doing regular extra hours, they may hit this threshold – so, it’s worth investigating whether you need to hire more staff or restructure to reduce the pressure on your team member.

Ensure employees know how to request TOIL

Employees should understand the process for requesting time off in lieu and recording additional hours worked. Make sure you train your managers on how to assess and approve TOIL to ensure it’s fair and within the limits of your policy.

Having a transparent request system helps avoid disputes and supports stronger workforce planning. If your HR system isn’t that sophisticated, a request form that makes it simple for employees to ask for TOIL is an easy way to keep track of how many extra hours your team has worked and how much leave they have available to take.

How to record TOIL

Recording TOIL accurately is essential for staying compliant and ensuring your team can take the time they’ve earned. There are a couple of ways you can do this:

Use an HRIS

The simplest and most efficient way to record TOIL is by using an HR information system (HRIS). Most modern HRIS platforms allow employees to log their additional hours and request TOIL, making the process easy for your employees and managers. If you use a clock-in system, you can often use this to automatically record an employee’s TOIL based on their clock-in and clock-out times and any rules you set.

A good HRIS platform will allow you to generate reports too, so you can track trends and identify any issues with workloads.

Use spreadsheets

If you don’t have access to an HRIS, a well-maintained spreadsheet works well. However, you’ll need to have a clear record of employees’ standard working hours and reliable timesheets or clock-in data to back up any overtime.

To make the process easier to manage, consider adding a formula that highlights when an employee has accrued more TOIL than they’re allowed to bank, and when they are getting close to the Working Time Regulations maximum working hours. This can help you stay on top of outstanding leave and ensure your team uses it before it becomes a problem, either to your business or to your employees’ mental/physical health.

What to include in your TOIL policy

It’s essential to have a comprehensive TOIL policy that tells employees and managers how the system works to prevent misunderstandings. Your policy should be specific enough to guide day-to-day decisions, but flexible enough to cover different situations. Here are the key areas to include:

• When TOIL can be used: Explain the scenarios where TOIL may be accrued in your business, such as during seasonal busy periods (like Christmas), when you have short-term projects to get over the line, or to cover for colleagues in exceptional circumstances.
• What counts as ‘extra hours’: Set out what qualifies as additional hours for TOIL purposes. Many businesses define it as anything over contracted hours, but you might want to set a threshold, such as only recording time worked over an additional 30 minutes.
• How TOIL is calculated: Clarify how additional hours are converted into time off. For example, one hour worked equals one hour of TOIL, or whether you round up or down to the nearest 15 minutes.
• Compliance with employment law and internal policy: Outline how the TOIL policy aligns with your contractual obligations, the Working Time Regulations, and internal HR policies, including ensuring that employees’ average pay doesn’t fall below the National Minimum Wage.
• How TOIL is tracked: Specify your tracking method, whether it’s through an HRIS, timesheets or a shared spreadsheet. Make sure employees know where to check how much TOIL they’ve accrued.
• Approval process: Define who can approve TOIL requests and whether your employees need to get this approval before they work extra hours.
• Time limits: State the deadline for when accrued TOIL must be taken, to avoid your team building up too much leave. You may choose for this to be within a month, 3 months or before the end of your holiday or tax year – whatever makes sense for your business.
• The difference between TOIL and flexitime: Make it clear that TOIL is time off granted in exchange for extra hours worked, whereas flexitime is a pre-agreed arrangement allowing employees to vary their start and finish times without increasing their total hours worked each week.
• How you will monitor the policy: Explain how you will monitor your employees taking time off in lieu to prevent burnout and ensure a healthy work-life balance.

How to implement your TOIL policy

When you’re ready to implement your time off in lieu policy, there are a few steps to take to ensure that your team and managers understand what’s expected of them. Here’s our process for implementing and managing your TOIL policy:

1. Communicate the policy: Share it in writing via email, your intranet, or employee handbook, and hold a short meeting to explain how TOIL works. Explain why it’s being introduced and its benefits for staff and the business. Use practical examples so employees understand how it applies to their roles.
2. Be ready for questions: If you’re moving away from paid overtime, explain the reasons for the change, such as cost control, flexibility, and better work-life balance. Offer a short transition period where staff can choose between paid overtime and TOIL, and be ready to address concerns from those who prefer extra pay.
3. Train managers: Ensure line managers fully understand the policy, including how to approve, record, and monitor TOIL. They should apply the rules consistently and spot when workloads are becoming unsustainable.
4. Update systems: Put your chosen TOIL tracking method (HRIS, timesheets, or spreadsheets) in place before launch and ensure payroll and HR systems are updated to reflect the new process.
5. Monitor and review: Regularly review TOIL balances to make sure employees are taking their time off promptly and not building up excessive hours. Gather feedback and adjust the policy if needed to keep it fair and useful for your organisation.

So, TOIL can be an effective benefit to offer your team to help them keep a good work-life balance and reduce your staffing costs. Just ensure that your employees understand how to request it, you have a robust system in place to manage it, and you have a detailed TOIL policy that covers everything your team needs to know.

How we can help

Implementing and managing TOIL isn’t always straightforward. Our team of HR specialists can help you with everything HR policy and process and employee relations related. Get in touch with the team on 0330 223 5253 or office@fitzgeraldhr.co.uk.