What Is Time Off in Lieu (TOIL)?

Changing timetable patterns and alternative work schedules have become the new normal in the modern workplace. Among various flexible schedules coming into the picture, TOIL has also appeared as a preferred solution for compensating overtime work. TOIL or Time off in lieu is when an employee is entitled to extra time off for the additional hours worked, instead of any monetary overtime compensation. Read this blog ahead to know what TOIL is and how it can benefit employers and employees.

What Is Time Off in Lieu (TOIL)?

Time off in lieu refers to the practice where employers provide time off to their employees for the time worked above contracted hours instead of giving them overtime pay.

In lieu is a French term that refers to “instead of”. In ‘Time off in lieu’, employees get additional time off for working extended hours, unlike overtime pay, where they are paid for those extra hours. 

For example, if an employee is contracted to work for four days per week, but works five days in a certain week, then they are entitled to one day off in lieu. As another example, if an employee is contracted to work for 40 hours a week, but worked 44 hours during a certain week, then they should be granted 4 hours of time off in lieu as compensation.

However, the TOIL policy can vary from one organization to another depending on the work culture, priorities, and shifts. The terms and conditions related to time off in lieu are agreed upon between the employer and employee beforehand.

TOIL gives employees an opportunity to earn additional time off in return for working extra hours. However, employers can choose if they want to offer time off in lieu on an hourly or daily basis. For example, they can either choose to grant one day of time off for every day of overtime worked, or provide them one complete day off for working half day on the weekend, etc.

How Is TOIL Different From Overtime Pay?

Under TOIL, employees get extra time off for working additional time beyond their contracted hours. In the case of overtime pay, employees are entitled to extra paid compensation for working additional hours above the normal working hours. In addition, the overtime pay rate may vary as per the regulation followed in the specific region.

Is TOIL Beneficial for Employers?

TOIL is beneficial for employers in certain cases as they don’t have to provide the overtime pay in addition to the remuneration for the extra hours worked. This way, the resource costs remain predictable and certain. To implement this properly, it’s advised that specific guidelines for time off in lieu are created and included in the company policy. Make sure your employees are acquainted with this policy during the onboarding process in case they would like to work extra hours during tight deadlines.

Is It Mandatory to Provide TOIL or Overtime Pay?

In many countries, it’s not mandatory for employers to give their employees either overtime or TOIL if they work extra hours. However, it’s a good practice to compensate your employees with overtime pay or off in lieu, when they work additional hours. In fact, as long as employees are not forced to work additional hours against their will with no compensation provided, overtime is considered legal. However, in many countries, there’s a strict rule regarding working hours. For example, in the UK, employers can not force employees to work beyond 48 hours without a written agreement.

Advantages and Disadvantages of Time Off in Lieu

Advantages

• Acts as an Incentive for Employees With High Salary

For a lot of employees who are already driving high salaries, the option of getting TOIL can act as a better motivator than getting paid overtime. Such employees would prefer the additional day off rather than getting paid a little extra.

For instance, working parents can choose to work extra hours so that they can use their TOIL to spend time with their children during the holiday season. Also, working additional hours to get more lieu leaves helps employees accomplish their necessary pending duties at their convenience.

• Improves Work-Life Balance

It’s observed that employees who have a better work-life balance are more fulfilled and productive. Apart from being a legal requirement, time off is also essential for the mental and physical well-being of employees. According to a report from WHO, working beyond 55 hours a week can increase the chances of stroke and heart disease. In addition, long working hours can lead to insomnia, anxiety, and stress, causing poor health. 

It’s crucial that employees take proper time offs to recharge and rejuvenate, resulting in better work-life balance. This is where TOIL comes into the picture, as they can utilize their off in lieu to take a break from work whenever they feel the need to do so. 

• Keeps Costs in Check

Time off in lieu is beneficial for employers as off in lieu is the alternative to overtime pay to avoid the resource cost. TOIL is a cost-effective alternative over overtime pay to incentivize employees to work more. Especially employers who are struggling with cash flow and resource shortage benefit the most from the policy.

Disadvantages

• Banking Up Many Time Offs

It’s likely that employees start to bank up multiple time off in lieu and use them all at once. This may put extra strain on other staff or team members. Therefore, it’s advised to set a maximum duration till which the off in lieu can be used.

• Extra Load on Management

Tracking total working hours and calculating TOIL adds to the workload of the management and HR. Moreover, they need to record accurate time overworked by employees and stay on top of the calculations to avoid any conflicts. Since TOIL is quite different from regular paid time off (PTOs), its implementation can create further complexity for employers.

• Negative Response From Employees

In low-paid jobs, employees would prefer to have overtime pay instead of time off in lieu for working overtime. As a result, this policy may get a negative response in certain organizations. Therefore, it’s advised that before introducing the TOIL policy, employers must assess the needs of their employees and the organization.

To avoid unfavorable scenarios, here are some points that employers need to keep in mind before implementing TOIL:

1. Individual preferences should be considered before implementing this policy.
2. The off in lieu must not replace the annual leaves.
3. The TOIL policy must not be enforced, nor should it be used to persuade employees to work extended hours. Instead, employers can apprise the employees that overtime work is required for which pay isn’t available, but they can provide off in lieu as compensation.

• Misuse of TOIL Policy

Some employees tend to take advantage of this policy and work extra hours to earn TOIL even if overtime is not required. Therefore, it’s necessary to have a well-defined overtime policy, such as mandatory approval from the manager to work extended hours, so that employees do not misuse such a policy for their own benefit.

• Difficult to Manage a Mix of Overtime and TOIL Policies

Organizations that allow choosing overtime pay or TOIL as per individual preferences may find themselves in hot water. That’s because some employees will prefer the TOIL policy, while some would opt for overtime pay. Managing individual preferences can be cumbersome, as HR will have to keep track of who is opting for which system and will have to operate accordingly.

How to Calculate TOIL

It’s necessary to keep track of extra time that employees work either using a spreadsheet, timesheet, or time tracking software. However, ensure that the system you implement can record accurate overtime hours. You can leverage our time tracking software that can capture the time from anywhere, anytime, and from any device.

Now, once the tracking system is finalized, you can calculate the TOIL as per the day or hourly basis. For instance, if the employees are contracted for four days per week of work, but worked five days, then they will be entitled to 1 day off in lieu. Similarly, if an employee works for 40 hours a week, but needs to work for 50 hours in a particular week, then they should be provided with 10 hours of time off in lieu.

Every hour worked beyond the contracted hours is called “banked hours”. Once the TOIL is calculated, it’s up to the employer to decide when the employee can avail of the time off in lieu.

TOIL and Contracts

It’s the organization’s call to adopt the time off in lieu policy, but if they implement the TOIL, it’s necessary for the employee contract cover to include all the mandatory details related to the TOIL. Here are a few questions that can be covered in the contract:

• Do employees get time off instead of overtime pay for working beyond the contracted hours?
• Who qualifies for the TOIL?
• What’s the minimum amount of time that should be worked to accrue the TOIL?
• What is the maximum time limit to avail of the TOIL?
• How much TOIL can an employee accumulate?
• Until what time period is the TOIL valid?
• What happens to the accrued TOIL if the contract is terminated? 
• Does the organization provide the same overtime rate for all extra hours or pay with a different rate for holidays and weekends?

It’s recommended that there should be transparency between the management and employees when it comes to implementing the time off in lieu policy. Management can take feedback from employees regarding their preferences for overtime compensation. However, the policy should not be forced, and management must respect individual preferences.

Best Practices to Manage TOIL

TOIL policy is not easy to implement in an organization but here are some of the practices that can make the TOIL implementation effortless.

• Do a Quick Review Session

Before enacting the policy immediately, take feedback from your employees on their personal choice between overtime pay and TOIL. Analyze how your staff responds to it and what the majority opts for. If you’re going for a mix of TOIL and overtime pay, make sure you’re providing fair compensation in both cases.

• Agreement Between Employer and Employee

Before implementing the TOIL policy, make sure that you sign an agreement with your employees regarding it. Ensure that every detail is documented in the agreement and your employees understand it clearly. Such an agreement should comprise all the details, and both employer and employee must sign it to confirm consent towards TOIL implementation.

• Go for a Quick Trial

It’s advised that before enacting the TOIL policy in your organization, do a quick trial with a few departments or teams. This way, you’ll be able to analyze if the policy works well and can be scaled across the entire organization. Once you’re certain about its results, then go for a full-fledged implementation across all departments.

• Apply TOIL Fairly and Consistently

It’s necessary to track how many hours an employee works extra and compensate them for those hours accordingly. Establish a fair rule for working extra hours on normal weekdays, weekends, and public holidays. Also, document it in the policy book to avoid any confusion and conflicts among employees.

• Tracking Accurate Time

To calculate accurate TOIL, ensure that the work hours are recorded accurately. Spreadsheets and other methods can be misleading and also lack accuracy. However, leveraging a digital time tracker can help in calculating the exact hours an employee works.

How to Effectively Implement a TOIL Policy

The best way to implement a TOIL policy is to get a solution that helps your business stay compliant, does not cause any inconvenience or productivity issues and is not something that requires a lot of expenditure.

Now you can very well think of getting an inhouse solution developed for this but such technologies can be costly to develop and maintain in the long term. What you’ll need is an  automated time off platform with a built-in system that can be managed by a vendor. 

Still wondering why you’ll need to make this investment?

Well, here are some of the perks of deploying automated time off software in your organization:

1. You can create time off, vacation, and other policies to meet your project-based organization requirements.
2. You can set rules for accrual and carryovers, overdraw limits, resets and effective dates to model your requirements. 
3. Employees can submit time off information for resources from anywhere & anytime and sync data in seconds with or without connectivity. 
4. You can use real-time data validation to create dynamic routing of time off to the right people. 
5. The pre-built rules from the compliance library help employers stay on top of time off and sick leave compliance.
6. The software helps in sharing data with a variety of systems for invoicing, project management, accounting, ERP, or other proprietary systems using the pre-built connectors and integration services. 

You can leverage Replicon’s Automated Time Off Tracking software to get all the benefits mentioned above and more. Moreover, this tool can be easily integrated with other systems within your business ecosystem to streamline workflow. 

Bottom Line

TOIL, or time off in lieu, is one of the most beneficial policies for employers who are facing staffing shortages and dealing with cash flow. Also, it acts as a rewarding opportunity for employees to get extra time off. TOIL can be effective in organizations if it’s managed fairly, but it’s important to respect individual preferences as well. To manage TOIL in an effective way, employers are recommended to use time tracking software that can capture the total working hours of employees in a fail-safe manner. For this, you can leverage our intuitive time tracking software trusted by global businesses. Start your free trial now!

Frequently Asked Questions

• How does Time Off in Lieu Work? 

Time off in lieu is a scenario in which employees are provided with time off rather than the overtime pay if they work more than the contracted hours. If an organization adapts the TOIL policy, an agreement is signed between the employer and employee as consent.