In this article
Quick takeaways
- Time off in lieu (TOIL) gives employees the opportunity to take paid leave, instead of extra pay, in exchange for overtime hours that they work.
- Clear policies and efficient systems make it work for businesses. They define accrual rates, expiry rules, cash-out options and keep accurate records.
- TOIL keeps costs under control and boosts morale. While employees are enjoing their time off, businesses keep their staffing budgets predictable and benefit from motivated staff.
In the modern world, working patterns are changing. Time off in lieu (TOIL) is a solution more employers are using to compensate employees for extra hours without increasing payroll costs. Better technology has transformed how we work, manage teams, and run companies. Over half of UK workers are now working non-regular hours outside 9-5, and companies have had to adapt to become more attractive and progressive employers.
With irregular hours, overtime may be required. While there is no legal requirement to pay for additional time worked beyond what is contracted (provided the minimum wage is met), unpaid overtime is rarely well-received. If regular and unrecognised, it does not make for happy employees.
Ideally, employees should be compensated for additional hours worked, but budgets don’t always allow for it, especially when overtime occurs during cash flow challenges. This isn’t an insurmountable or overly complex issue and doesn’t need to be a source of stress or confusion.
What is time off in lieu?
One way to ensure staff who work overtime are fairly compensated without putting the company under financial strain is to offer time off in lieu (TOIL).
'In lieu' means 'instead of'.
The meaning of time off in lieu is paid time off given instead of additional payment or overtime rates for hours worked beyond an employee’s contract.
How does time off in lieu work in the UK?
How to calculate TOIL (including accrual rates and use of TOIL in UK workplaces)
In practise, time off in lieu works through a structured accrual system, where extra hours are recorded and converted into paid leave. Generally, it will be based on overtime hours at a 1:1 rate, but some companies may offer a 1.5:1 policy if overtime occurs on a weekend or bank holiday.
Accrual rates and formulas
The TOIL formula is quite simple.`
If the accrual rate is 1:1:
TOIL = Overtime hours earned x Accrual rate
For example: if your employee works 3 hours above their 38-hour contracted week, they will earn 3 hours of TOIL at the 1:1 rate.
If the employee works 5 hours above their contracted week and those overtime hours occur on a weekend, a company that offers a 1.5:1 accrual rate on weekends will give them 7.5 hours of TOIL.
What should a time-off-in-lieu policy include?
A clear time off in lieu policy UK employers can rely on should explain accrual rates, limits, expiry rules and how TOIL interacts with annual leave.
Key elements of a time-off-in-lie policy
Accrual limits and expiry rules
Defining the amount of time that an employee can accrue is crucial. Businesses often set limits on TOIL accrual to prevent excessive unused leave piling up. Many employers also have a ‘use it or lose it’ style policy, for up to 12 months, so that staff take their earned time off.
Cash out and pre-approval options
If an employee does not have the opportunity to use their time off within the expiry limit, some employers may allow employees to ‘cash out’ their extra leave. Of course, all TOIL requests should be pre-approved to ensure that the business has coverage and no staffing conflicts. This supports staff wellbeing and maintains consistent productivity.
Record keeping and transparency
TOIL policies are not a one-size-fits-all strategy. You may find that people throughout your business have different preferences. For example, an employee on a lower salary may prefer overtime pay. It is very important to consider the demographics of the wider team and individual team members, along with operational requirements, to create a balanced policy. Policies should be flexible where possible and non-compulsory to avoid resentment or misuse.
Using leave management software to implement TOIL
Managing the admin around TOIL is much easier if you are using reliable absence management software. Leave Dates is a great platform that lets your staff work with you to log their overtime hours and track how they're redeemed.
How to create a TOIL policy in minutes using Leave Dates
Advantages of time off in lieu
Offering TOIL can improve employee satisfaction and retention, as it goes beyond statutory requirements and incentivises employees to be available when needed.
Gives you time back
In the busy, demanding, and often high-stress modern work environment, time is an increasingly valuable commodity, and many people would value a lieu day more than additional pay.
It’s also mutually beneficial and appreciated in roles with high salaries, where money may not be as much of a motivator as time away from the office. This is particularly true if it follows an exceptionally demanding period.
Indeed, accrued ‘lieu days’ upon completion of a project may be a powerful incentive for some to work more or longer days to meet essential deadlines.
Keeps costs under control
As an alternative to paying overtime, time off in lieu helps companies to avoid a cost that they may not be able to meet without angering their staff or planting seeds of resentment that could lead to workplace issues or problems with employee retention.
This is particularly salient if the situation that has given rise to the need for additional staffing is associated with a financially or professionally challenging time, when management's focus may need to be elsewhere.
Encourages healthier work-life balance
Having a TOIL policy allows your team to regain some work-life balance and take meaningful time off without worrying about losing any pay. This can minimise burnout, improve focus and allow your team to return to work refreshed. Employees who feel supported in managing their time are generally more engaged and productive at work.
Gives your team a morale boost
Everybody likes to be rewarded for extra effort, knowing that extra hours are rewarded with time off, rather than a pizza party, creates goodwill. You can be sure that employees will be more keen to cover busy periods and go the extra mile if they know they will be compensated later.
Reduces the risk of absenteeism
Overworked employees are high-risk for unplanned sick leave. If TOIL is offered as a structured option, instances of unscheduled sick leave may decrease dramatically.
Disadvantages of time off in lieu
Without careful management, TOIL can be abused and become an expected substitute for overtime pay. It can even lead to understaffing during busy periods.
It can be tough to implement across the whole team
For one, it cannot be enforced from the top down as an alternative to overtime. In some sectors, particularly in lower-paid roles, employees may prefer to be paid overtime and thus respond negatively to the internal promotion of such a policy.
It will likely not be equally well received across your entire staff. For part-time staff, time may not have as much appeal as additional pay. It is therefore essential to consider your employees' demographics, circumstances, and needs. In this case, these must take priority over the company's needs and situation, and individual preferences must be honoured and respected.
Indirect costs of TOIL
While it doesn’t have a direct or immediate cost, offering TOIL is not without expense. The company will pay for the employee’s time at some point, but that may not be convenient for the employee. We would argue, though, that if the company cannot afford to pay for time in lieu or overtime and regularly relies on employees to work additional hours, there is a larger business issue that needs to be addressed rather than pointing to an inherent weakness in time-in-lieu policies.
Policy creation and agreement
Time will need to be spent creating and agreeing to a TOIL policy that sets out how time in lieu is to be awarded and taken. This is important to avoid a cycle in which staff need to work overtime to cover those taking time off in lieu.
This creates an additional administrative burden, though you may feel the policy's benefits outweigh it.
Administrative considerations
Implementing TOIL can add an administrative burden, especially if you are using spreadsheets or a manual system to track leave.
Tracking accruals, approvals, communication, and documents takes a lot of time, but a well-managed policy, combined with leave management software, makes it easy to get started.
Recognise every extra hour with TOIL tracking that works.
Leave Dates records and updates TOIL hours automatically, so busy managers know their numbers, and employees feel recognised.
No spreadsheets, no confusion, just great software with a 30-day free trial.
and remember...
Lieu days should never be used in place of a clear, fair annual leave policy.
It is important to reiterate that a ‘time in lieu’ policy cannot be forced or assumed, and it should never be misused as a way to persuade employees to work excessive hours.
Here, much depends on how the policy is presented. If management clearly communicates that paid overtime is not a possibility. Yet, employees need to work additional hours, and if the company can offer time in lieu, this is likely to be better received than a ‘take it or leave it’ approach.
Final thought
Is TOIL right for your business?
In summary, whether a time off in lieu policy is suitable for your company depends on whether it aligns with your staff and your workplace values and priorities. Creating a policy that genuinely fits the needs of your team will be far more successful that one imposed from the top down.
Effective communication
We recommend being open and transparent. Speak to your employees to gain their feedback and views. If they are receptive to a policy or indeed welcome the opportunity for additional paid time off, you can promote it internally as part of a wider wellbeing strategy.
When used effectively, TOIL offers a logical, fair, and mutually beneficial solution to periodic or seasonal staffing demand fluctuations and to particularly busy or stressful periods.
It has limitations, but most of the risk can be avoided through careful management.
Leverage technology
Online tools, such as Leave Dates, can ease the administrative burden, enabling you to schedule and approve time taken in lieu. This can all be done without adding extra stress to your management and HR teams.
The bigger picture
Remember also that for any non-enforceable policy to succeed, you must respect and honour the individual wishes of those who opt out.
By listening to your staff and understanding their motivations and needs, a time-off-in-lieu policy could greatly benefit both your workplace and your employees’ well-being.
FAQs
Time off in lieu is paid leave given to employees instead of additional pay for hours worked beyond their contracted schedule. For example, if an employee works 5 extra hours in a week, they can take 5 hours off later instead of receiving overtime pay.
TOIL is often accrued by hours worked beyond the employee's contract. They are recorded and typically converted into paid leave hours at a 1:1 rate. Some companies may offer enhanced rates, particularly on weekends and bank holidays. Policies can include limits, expiry and cash-out options.
Not necessarily, but it is always worth considering. TOIL works best when staff express that they value time off, and the business can manage coverage without disrupting operations.
Time off in lieu is not a replacement for statutory leave entitlements, and individual preferences must be respected. Transparency and communication through good systems are the key to a successful implementation of TOIL.
