Time off in lieu: A guide for managers

Time off in lieu gives employees the chance to reclaim their personal time. For business owners and managers, it's a valuable tool for promoting work-life balance. This guide explores the ins and outs of time off in lieu - from what it means, how it benefits employers and employees, and the best practices for creating a clear policy.

What is time off in lieu?‍

Time off in lieu - also known as TOIL or time in lieu - refers to the compensated hours that an employee earns for working extra time or when they're not usually expected to work, like bank holidays.

In other words, time off in lieu allows employees to take that time back, rather than being paid overtime.

Time off in lieu may be calculated in days or hours, while a “day in lieu” or a “lieu day” will be calculated as a full day to take off.

What's the difference between TOIL and overtime‍?

Time off in lieu and overtime are two different methods of compensating extra work for employees and each have their benefits.

	Time off in lieu	Overtime
Compensation	Equivalent time off is given for the hours/days worked	Additional pay is given for the hours/days worked
Purpose	Promotes work-life balance and reduces the risk of burnout	Provides financial compensation for extra work
Impact on payroll	Reduces payroll costs for the employer by avoiding overtime pay	Increases gross payroll costs for the employer by adding extra pay

What are the benefits of time off in lieu?

Employee benefits

It promotes a better work-life balance, giving employees the opportunity to take time back for themselves and help prevent burnout

Instead of taking additional pay, they can use this accrued time off to recharge, take a longer holiday or attend to some life admin

Some employees prioritise their personal time and wellbeing, so the promise of extra time off is more appealing

Employer benefits

TOIL helps manage and control payroll expenses by avoiding paying overtime

A well-rested team is more productive, engaged and less likely to experience a drop in performance

A flexible and fair TOIL policy shows that you value your team's contributions and wellbeing, helping to improve retention rates and enhance your company's reputation as a great place to work

How to calculate time off in lieu

The calculation for time in lieu or a day in lieu is typically straightforward:

An hour worked overtime translates into an hour off

A day worked overtime translates into an additional day off

So if someone is supposed to work 37 hours a week but works 40, those 3 additional hours could be counted as TOIL.

Some employers may offer a higher rate, such as one and a half hours off for each overtime hour or a day and a half for a day’s worked. For example, this can be offered on days that are usually not worked, like bank holidays or weekend days. This is completely discretionary to the company��s policy on TOIL.

Implementing a time off in lieu policy

UK legislation regarding time off in lieu

‍In the UK, there's no legislation that requires companies to offer time off in lieu. But, if you do decide to offer TOIL, you should state this clearly in your employees' contracts.

Any time off in lieu policy mustn't breach the Working Time Regulations 1998, which sets a limit of working 48 hours a week on average (over 17 weeks). This limit applies unless you 'opt out' of the limit or you work a job with different working time rules.

Other than that, TOIL is not explicitly defined. This means that, as an employer, you have a certain level of freedom with setting your company’s policy when it comes to offering days in lieu of work.

TOIL and employment contracts

If you do want to create a time off in lieu policy for your company, you’ll need to either add a clause in your employment contracts or your employee handbook.

Things to bear in mind when formulating a new policy:

Write the policy with as much detail as possible to avoid any doubt for yourself or employees, and keep things fair (see below for details on this)

If you’re adding a new policy to your Employee Handbook, you’ll need to communicate this to your team

Things to keep in mind when adding a clause to an employment contract:

Always get legal support when adding new clauses to your contract. It’ll save you time and money in the long run

For employees who don’t have this clause in their contract, you can either ask them to sign an amended version of their employment contract, or communicate to them your new employee policy

Before adding a new clause, check your existing employment contracts to ensure they don't contain language that prohibits time off in lieu

Best practices for writing a TOIL policy and implementing it

Your policy should detail very clearly:

In what scenario(s) TOIL can be offered to employees

How much time in lieu can be accrued every month

If employees have the right to choose between overtime pay or TOIL, or if one takes precedence over the other

What the maximum amount of time when TOIL has to be taken: can it be carried over to the next year? Or does it need to be booked within the current calendar year/quarter/month?

What happens when an employee leaves and has accrued TOIL they’ve not yet taken off?

Being clear and transparent on the rules surrounding time off in lieu will ensure the policy is applied fairly and consistently across your team.

Once your policy has been written, you can communicate it to your employees so they’re aware of the new rules.

Finally, we’d recommend keeping a log of the time in lieu booked by your employees. This can be through a manual log, or by creating a separate time-off policy.

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