How to Work Time Off In Lieu into Your PTO Policy
Time Off In Lieu, or TOIL, is a common HR practice, which is important to understand if you’re running a business or a team, or working in HR.
It’s not used everywhere, though, so many people won’t be aware of how Time Off In Lieu works, when it’s used, or how it should fit into your leave policy.
Keep reading and we’ll explain all this for you, so you have a complete understanding of Time Off In Lieu and whether it’s right for your business.
What is Time Off In Lieu?
Time off in lieu usually refers to a system where employees are compensated with time off instead of overtime pay for working extra hours.
Instead of being paid additional wages for overtime, employees earn PTO, often at a rate equivalent to the extra hours worked. This leave can then be taken at a later date (subject to approval by the employer).
Common Uses for Time Off In Lieu
Time Off In Lieu is often an alternative to overtime pay.
Let’s say, for example, an employee is contracted to work 40 hours per week.
One week, they stay and work an extra 4 hours. Instead of being paid for an additional 4 hours, they are compensated with 4 hours of paid time off – in lieu of overtime pay.
Sometimes, TOIL is provided alongside the employee’s regular pay as additional compensation for overtime.
An employee might need to come into work on a Saturday, when they’re contracted to work Monday to Friday.
For their work on Saturday, they receive their regular rate of pay, in addition to Time Off In Lieu.
This is also common for employees who work on a public holiday – they receive additional time off in lieu of the day off they were entitled to for the holiday.
In New Zealand, for example, it’s common practice to receive time and a half (1.5x your regular pay) plus Time Off In Lieu (one additional day of PTO) as compensation for working on a public holiday.
TOIL vs Overtime Pay
TOIL is often provided as an alternative form of compensation to overtime pay.
Unless your company has any specific legal requirements in regards to TOIL or overtime pay, it’s up to you to decide how to handle overtime, and whether to compensate employees financially, or with additional time off (or a mix of both).
The Case for TOIL
The biggest benefit of offering TOIL instead of overtime pay is that it protects against overwork and burnout, and promotes work-life balance.
Each hour of overtime an employee works is one hour less for their personal life, spent on personal pursuits, with friends and family, or just resting and unplugging.
Coupled with a financial incentive to work overtime, employees may end up working too much for their own good, leading to stress and burnout down the road.
The Case for Overtime Pay
Time Off In Lieu may require more administrative work. You need to track the additional leave entitlements, possibly separately from regular PTO, if you have different expiry, rollover and payout rules for TOIL.
And while the idea is to promote employee wellbeing, many employees see TOIL as a less attractive benefit.
Overtime pay is typically realized sooner, and extra dollars in the employee’s bank account feels better than a few extra hours in their PTO balance.
Overtime pay may work better for employers who are strapped for staff. TOIL means you need to plan for the employee’s absence at a later date – and if they’re working overtime, it’s likely the business is already struggling to find enough labor.
Thus it may just be simpler for the business to pay for overtime instead.
Legal Considerations
The most important thing to understand in regards to Time Off In Lieu and overtime pay is what the law entitles employees to in your area.
Some countries or states require employers to provide overtime pay for working more than a certain number of hours in a week or a day. Some have similar laws for employees required to work on weekends or public holidays.
US employees covered by the FLSA (non-exempt employees), for example, must receive overtime pay at least 1.5x their regular pay for any hours worked over 40 hours in a week.
In other areas, such as the UK and Australia, companies may be able to provide TOIL instead of overtime pay.
Make sure you know the rules in your country and/or state, and use this as the starting point for your TOIL/overtime policy.
Here are some official government resources to refer to regarding Time Off In Lieu laws:
- US Department of Labor
- Gov.uk
- Fair Work Ombudsman (Australia)
- Employment New Zealand
- Government of Canada
Rules for Time Off In Lieu
If you choose to provide TOIL in your company, it’s important to create a set of rules for how TOIL is managed.
You should include this information as part of your PTO policy, and ensure it’s all clearly and readily available for employees to view.
Here are some things to cover in your TOIL policy:
How to Earn TOIL
Lay out the situations where TOIL can be earned – for example, for working over your scheduled hours for a day or a week, or for working on a public holiday or weekend.
As part of this, explain who is eligible for TOIL (such as salaried or non-salaried workers, part-time or full-time).
TOIL Accrual Rate
Specify the rate at which TOIL is given.
It’s common to provide TOIL equivalent to 1.5x the hours worked. So if an employee works an extra 8 hours in a week, they would receive 12 hours of TOIL.
Unless the law specifically says anything about TOIL and/or overtime pay, though, the company is free to decide the TOIL accrual rate for themselves.
Special Guidelines for Earning TOIL
Include any additional guidelines that may be necessary regarding how employees earn Time Off In Lieu.
For example, you might want to state that only overtime that has been approved by a manager will be compensated with Time Off In Lieu, to avoid employees taking it upon themselves to work extra hours and game the system.
You may also choose to give employees the choice between TOIL or overtime pay, which should be communicated as part of your overtime policy.
When TOIL Must to Be Used
Often (though not always), companies require TOIL to be used within a certain timeframe, to protect against overwork and burnout.
If so, state this rule in your TOIL policy, and ensure your leave management system tracks these days separately from regular vacation days or PTO.
Rollover/Payout Rules for TOIL
If necessary, state any differences in rollover or payout rules for Time Off In Lieu.
State whether TOIL carries over or expires after a certain time, and what happens to unused TOIL at the end of someone’s employment (whether it’s paid out as cash, or expires if unused).
How to Track TOIL
The final consideration for TOIL is how to track it.
Some companies may track TOIL as a separate leave type, with its own bank, rollover and payout rules.
This takes extra work, though, so consider whether this is necessary.
The alternative is just to include TOIL as additional PTO or vacation days. When someone is given TOIL, it’s not tracked as a standalone leave type, but instead added to their regular PTO balance.
From this point, TOIL just works the same as regular PTO does in your company, with the same rules and regulations for employees to follow.
We recommend this approach – but consider your own company’s situation and what suits you best.
Final Thoughts
Time Off In Lieu is an effective way to compensate employees for going above and beyond their regular working hours.
The biggest advantage of TOIL over purely financial overtime compensation is that it helps employees maintain their work-life balance, giving additional rest and time off to compensate for the extra time spent at work.
However, it’s not always the best approach, and sometimes you’ll find that overtime pay is more sought after and a better motivator in your company.
