In some businesses, when employees work overtime, their employers don’t give them overtime pay, instead opting to give them annual leave to be used at a later date.

Time Off In Lieu of Overtime (TOIL) is the name of this, and it’s most common in businesses that have flexible working arrangements, variable workloads, or processes that require a certain number of people to be present at a time.

So places that have sudden demands for staff, like restaurants, call centres or security contractors might use this when they really need extra cover, but can’t (or don’t want to) budget to pay overtime.

This can be a bit of a headache to administrate, but it can be a useful compromise in certain cases.

Here’s a quick guide to how it works.

What is Time Off In Lieu?

Time Off In Lieu is when someone works overtime, but instead of being paid extra for their efforts, they’re granted an annual leave allowance for another time ('in lieu' means ‘in place of’).

So if things are busy and the business needs all hands on deck, the boss might say, “If you work a half-day on Saturday I’ll give it back in TOIL”.

If the employee hasn’t got anything on that Saturday, they might be happy to pitch in to help out, knowing they’ll bank a half-day of leave which they can use later in the year.

What are the rules around TOIL in the UK?

Firstly, there’s no defined rules we can tell you - it’s up to businesses and employees to define the terms of a TOIL agreement.

It’s often used unofficially, with no set policy written down anywhere.

This can often happen in smaller companies, where the temptation to keep things casual and rely on verbal agreements is strong (until something goes wrong).

And you can imagine things going wrong if it’s not written down. What if someone works under a TOIL agreement, but their extra leave allowance is conveniently forgotten about?

TOIL is often called upon on short notice, but that doesn’t mean the formalities should be skipped.

How should companies deal with TOIL?

It begins, as we always recommend, by having a proper staff absence policy.

This doesn’t have to be a major undertaking if you haven’t got one yet. In fact, we’ve made some customisable templates for you.

In bigger organisations, creating rules around TOIL can get complicated. Even so, if your business is the type that might require usage of Time Off In Lieu, it’s worth adding a section in to your policy about how it works, and how it’ll be recorded.

This should include:

  • How many days maximum can be banked as TOIL
  • When the TOIL days have to be used by (end of the year or sooner?)
  • How much TOIL, across the business, is too much? (banking too much will increase holiday demand later in the year)

Remember, employees can't be forced to work overtime, and can't be forced to say yes to a TOIL agreement. And you must adhere to the Working Time Regulations 1998, which state that they can't work more than 48 hours a week (including overtime) without written agreement.

The downsides of TOIL arrangements

TOIL is usually called upon when the workload is particularly busy for everyone in the business.

It can highlight staffing issues, though, if it’s being relied on frequently throughout the year. As a temporary measure it’s fine, but too much will really disrupt the holiday schedule. If person A is taking back TOIL time which causes person B to be denied their request on that day, that’s unfair.

If it's being relied upon a lot to cover staffing shortfalls, there are clearly underlying issues with staffing that need to be addressed long-term.

If TOIL isn't managed correctly, it could lead to chaos towards the end of the year when everyone wants to use up the extra leave they've accrued. There's also the possibility of a general imbalance across your company if people start getting stressed from all the overtime they're working, leading to more leave requests and possibly higher rates of sickness absence. Not good.

Employees need to be aware of exactly how their contributions are recorded, so they can understand what they're entitled to, and know that they’re being treated fairly compared to their colleagues.

Having clear absence & TOIL policies, and a proper system for recording leave is important to prevent any problems in future.