How to manage time off in lieu for your employees

When your employees are called upon to work extra hours, giving time off in lieu is often a business-savvy way of managing costs and supporting employees to keep a healthy work-life balance.

Giving time off in lieu for overtime is particularly common for higher paid employees who would actually prefer time off instead of extra pay, but is also a useful way to manage situations where you need staff to work extra hours during particularly busy periods or to fulfil unusually large orders.

Seems straightforward doesn’t it? An employee works 3 hours extra and gets 3 hours additional leave. Actually, managing time off in lieu can be fraught with difficulty. As there is actually no legal right to be paid for extra hours worked, this is an area many employers struggle to get right.

One of the biggest frustrations business leaders are faced with when it comes to time off in lieu is the accumulation of owed time and how to record it.

In this blog we’ll be addressing many of the issues around time off in lieu. We’ll look at how time off in lieu works and the common problems that arise, as well as offering some tips on how to manage it effectively.

What is time off in lieu?

Time off in lieu (also known unfortunately as TOIL) is where you agree to give an employee paid time off in lieu of extra hours they have worked (overtime) instead of extra pay.

How does TOIL work?

Time off in lieu cannot be assumed and neither can it be enforced. TOIL essentially has to be an agreement between you and your employees. If you agree with an employee that you will reward overtime with TOIL, then you should confirm your agreement in writing.

It is also a good idea to enforce an expiry date for taking any accumulated TOIL. The most obvious expiry date would be the end of the leave year, financial year or tax year. Some employers stipulate that TOIL must be taken in the month following that in which it was accumulated.

Recording extra hours worked as overtime is crucial. This can usually be done via timesheets, a spreadsheet or through a time logging system, such as that offered by Breathe.

Common Problems with TOIL

There are always going to be times in your business when you need staff to work extra hours. Sometimes a sudden drop in staff due to sickness means the only way to get through is to ask staff to stay late and cover the work. Paying overtime is one way to reward staff for the extra hours. Giving paid time off in lieu is another.

However, without careful management TOIL can cause problems, such as:

• Confusion over the rules
• Abuse of TOIL
• Overtime becoming the norm
• A build-up of TOIL
• TOIL being universal (not appropriate for certain roles, such as receptionists, for example)

If your people are regularly having to work extra hours it should raise alarm bells over whether your teams are adequately staffed, whether there are productivity issues, or efficiency problems requiring further training and support.

Presenteeism and lack of motivation may be reasons why staff are having to work longer to complete tasks, so it is important to look at the underlying causes before reaching for TOIL as a solution. Certain employees might take advantage of TOIL by slowing down productivity and working extra hours in order to get additional days off.

You know you have a problem when staff are taking lunch at their desk and logging it as an hour of research or when employees hanging around in the evening waiting for a lift, book an extra 30 minutes to their TOIL total. This behaviour is much more likely in a business with poor culture.

Read more about business culture in our report on The Culture Economy here.

TOIL can also create an environment where working extra hours becomes the norm. Then your business is faced with a never-ending cycle of covering gaps while people take their respective time off in lieu. It can end up in a vicious circle. In this situation, addressing why staff have to continually work extra hours is key.

Perhaps the biggest problem with TOIL is the accumulation of leave and managing when employees are able to actually take the accrued time off. It wouldn’t be good for business if employees were able to build up TOIL and take a whole month off, for example!

Tips for effective management of TOIL

Managing TOIL can be hard work for managers. Keeping track of who has worked overtime and when TOIL is taken can easily become a nightmare. Here are some tips for effectively managing time off in lieu:

Clarify the details of overtime or TOIL

It's extremely important to clarify the rules if you are going to operate a system of TOIL.

It's a good idea to check with individual employees whether they would prefer extra pay or time off in lieu of additional hours worked rather than making any assumptions.

There is no legal right for you as an employer to pay employees for extra hours worked, but it is good practise to reward your employees when they have gone above and beyond, either through bonus schemes, benefits, additional pay, or TOIL. Don’t forget how important a simple ‘thank you’ is. Importantly be clear with your employees on expectations around overtime and how they will be compensated.

TOIL is part of the EU Working Time Directive which states that employees don’t have to work more than a maximum of 48 hours per week. For more information on the maximum weekly working hours and exceptions, see here.

Agree TOIL terms in writing

Clarity is essential when you are implementing a time off in lieu policy and making the rules clear in employment contracts is a good idea. Or for individual one-off arrangements, you may prefer to agree the terms and conditions in writing outside of the employment contract. It is also a good idea to set out the minimum amount of time that can be recorded as TOIL.

Create an environment of trust

Good business culture requires trust. TOIL is an issue of trust and in most cases, employees will tend to give a little extra to the business than they actually take back.

Agree times TOIL can be taken

It makes sense to ring-fence when TOIL can be taken to less busy business periods. This is particularly useful for seasonal businesses where there are quieter days or times of year.

Establish a system for recording and approving overtime and TOIL

It can sometimes be difficult for managers to keep track of who has worked extra hours and when TOIL is being taken. If you are operating a system of TOIL it makes sense to have a streamlined process to deal with the administration. Online HR software is a great solution for this. Manual processes will waste time and money, and mistakes can occur more easily.

For more information on overtime and time off in lieu see guidance by the Advisory, Conciliation and Arbitration Service here.