Ever heard of Time Off in Lieu, or TOIL as it's often called? It's a pretty straightforward system where an employee who clocks in extra hours gets that time back as paid leave, rather than getting paid overtime.
You can think of it like a flexible ‘work-hours bank account’. When you work extra, you deposit hours, and later on, you can withdraw them as leave.
What Exactly Is Time in Lieu
Time in lieu is a really practical alternative to paying employees for going above and beyond their contracted hours. Instead of a financial payout, the company gives them the equivalent time off, fully paid. It’s a simple exchange: time for time.
This approach brings a good deal of flexibility for everyone involved. For the business, it's a great way to handle those unexpectedly manic periods without blowing the payroll budget. For employees, it offers a chance to reclaim their time, which for many is far more valuable than a bit of extra cash.
TOIL vs Overtime Pay
The big difference here is the form of compensation. Overtime is all about the money – you work extra hours, you get paid for them, usually at a standard or even a premium rate.
On the other hand, time in lieu is a non-financial reward. It gives back the one thing that money can't always buy: personal time.
Let's look at a quick example:
Scenario: A graphic designer stays late for three hours to get an urgent client project over the line.
Overtime: The company would pay her for those three extra hours, maybe even at time-and-a-half.
Time in Lieu: Instead, she banks three hours in her TOIL balance, which she can use to duck out early on a Friday a few weeks later.
Why Is TOIL Popular in the UK
Here in the UK, time in lieu is a really common way to handle extra hours. A big reason for its popularity is just how flexible it is. Generally, there's no legal cap on how much TOIL someone can build up, as long as it’s used within a reasonable period – often about six months.
This makes it perfect for industries where the workload ebbs and flows, like events, retail, and other seasonal businesses. You can find some more great insights on UK TOIL policies from the team at Sprintlaw.
At its core, time in lieu recognises that an employee's time is a valuable asset. Offering it back to them empowers them with greater control over their work-life balance, fostering loyalty and preventing burnout.
At the end of the day, the system works best when there's a clear and fair policy in place. That way, everyone knows exactly how hours are earned, tracked, and taken back.
Getting to Grips with the Legal Side of TOIL in the UK
You might be surprised to learn there's no single, dedicated 'Time in Lieu Act' in the UK. Instead, the practice is shaped by several crucial pieces of employment law. Getting these rules right is absolutely essential for keeping both your business and your employees on safe ground.
The big one you need to know about is the Working Time Regulations 1998. Think of this as the rulebook for working hours and rest periods. It’s your primary guide for making sure any TOIL system you set up is compliant and fair.
A cornerstone of these regulations is the 48-hour average weekly limit. Unless an employee has formally signed an opt-out agreement, their working hours, averaged over a 17-week period, can't go over this cap. It’s easy to see how accrued TOIL could tip someone over that average, so keeping a close eye on hours is a must.
Core Legal Points for Your TOIL Policy
Your TOIL policy has to play nicely with these regulations to be legally sound. This really boils down to one thing: making sure that even when your team puts in extra hours, their fundamental rights to rest are never compromised.
Here are the key legal goalposts you need to manage:
Daily Rest: Your employees are entitled to 11 consecutive hours of rest in every 24-hour period.
Weekly Rest: They must also get an uninterrupted 24 hours of rest each week (or 48 hours over a fortnight).
Paid Annual Leave: This one's critical. TOIL can never be used as a substitute for an employee's statutory holiday entitlement.
Ignoring these rest periods, even if an employee is happy to work for time in lieu, can land you in hot water. It's a fast track to non-compliance and potential legal headaches.
A clear, legally sound TOIL policy isn't just about ticking boxes; it's a powerful way to show you respect your team's wellbeing. It builds trust by proving you value their time and are committed to fairly recognising their extra effort.
What Happens to TOIL When an Employee Leaves?
One of the most common legal grey areas pops up when an employee leaves with a bank of unused TOIL. What do you do with those hours? Without a clear policy, this can quickly turn into a messy dispute.
Your employment contract or TOIL policy needs to spell out exactly how accrued time is handled on termination. You generally have two straightforward options: pay out the hours in their final payslip, or require them to take the time off during their notice period.
The average employment tenure in the UK can stretch over a decade, so it's not unusual for long-term employees to build up a fair amount of TOIL. But in fast-paced areas like Greater London where staff turnover is much higher, having a rock-solid exit policy is vital to manage these situations fairly every single time. You can explore more UK employee retention statistics to get a better sense of these trends.
How to Build a Fair and Clear TOIL Policy
A successful time in lieu system really boils down to one thing: a rock-solid policy. Without clear, written rules, you're just inviting confusion, inconsistency, and eventually, disputes. Creating a formal policy transforms TOIL from a vague, informal nod into a structured benefit that everyone understands and trusts.
Think of your policy as the instruction manual for your company's "work-hours bank account." It needs to answer every key question before anyone even thinks to ask it, making sure the whole process is fair and transparent for both employees and their managers. This document is your first and best defence against misunderstandings.
Ultimately, a well-crafted policy is all about setting clear expectations. It guarantees the system is applied consistently across all departments and puts a stop to any "special arrangements" that could lead to claims of unfair treatment.
Laying the Groundwork for Your Policy
Before you type a single word, you need to hammer out the core mechanics of your TOIL system. These foundational rules will shape every other part of the policy, so getting them right is crucial for creating a system that’s both manageable for the business and genuinely valuable for your team.
First up, decide who is eligible. Is time in lieu available to absolutely everyone, or will you limit it to specific roles or salary bands? For instance, you might decide that salaried senior managers aren't eligible, while it’s a perfect fit for your hourly staff.
Next, you have to establish the approval process for working the extra hours in the first place.
Pre-Approval is Key: Make it mandatory for employees to get a green light from their line manager before working any additional hours that will earn them TOIL. This simple step prevents time from building up uncontrollably and confirms the extra work is genuinely necessary.
Clear Communication Channels: Define exactly how approvals should be requested and granted. Is it via email, a project management tool, or directly through your absence management system?
This initial approval step is your main tool for managing workloads and stopping a culture where excessive hours become the norm. It keeps you in control of how and when TOIL is earned.
A robust policy is the bedrock of a successful TOIL system. To help you cover all the bases, we've put together a checklist of the essential components your policy should include.
Key Components of a Robust TOIL Policy
Policy ComponentDescriptionWhy It's Important | Eligibility Criteria | Clearly states which employees (e.g., by role, department, or contract type) are eligible to accrue TOIL. | Prevents confusion and ensures the policy is applied fairly to the intended group of employees. | Pre-Approval Process | Requires manager authorisation before any overtime is worked. | Gives managers control over workloads and budgets, preventing uncontrolled accrual of TOIL. | Accrual Rate | Defines how TOIL is earned (e.g., 1-for-1, or premium rates like 1.5x for weekends/bank holidays). | Ensures consistency and transparency in how time is calculated, so everyone knows what to expect. | Accrual Cap | Sets a maximum number of TOIL hours an employee can accumulate at any one time. | Protects the business from building up large, unmanageable leave liabilities and encourages regular time off. | Expiry Period | Specifies a timeframe within which accrued TOIL must be used (e.g., within 3 or 6 months). | Prevents indefinite stockpiling of leave and ensures the system remains current and manageable. | Booking Procedure | Outlines the exact steps an employee must follow to request and take their accrued TOIL. | Aligns TOIL usage with standard leave procedures, ensuring proper team coverage and operational stability. | Payment in Lieu | States the company's position on paying out unused TOIL, especially upon termination of employment. | Clarifies financial obligations and manages employee expectations, avoiding potential legal disputes.
Having these components clearly defined in your policy document will provide clarity for everyone involved and help prevent the common pitfalls associated with informal TOIL arrangements.
Defining Accrual and Redemption Rules
With the foundation in place, it’s time to get into the nitty-gritty of how employees earn and use their time in lieu. Being crystal clear here is vital to prevent people from feeling short-changed or managers being left short-staffed. A simple, straightforward approach is almost always the best.
The most common method is a direct hour-for-hour exchange. For every extra hour someone works, they get one hour of TOIL. Simple. However, you could decide to offer a premium rate, like 1.5 hours of TOIL for every hour worked on a bank holiday or a weekend, as a way to reward that extra commitment.
Setting clear limits is not about restricting employees; it’s about ensuring the TOIL system remains sustainable. Sensible caps prevent large, unmanageable liabilities from building up on your balance sheet and protect staff from burnout.
You must also establish firm rules for using the time that’s been banked:
Set an Accrual Cap: Decide on a maximum number of TOIL hours an employee can have sitting in their account at any one time. This stops an unmanageable amount of leave from building up.
Establish an Expiry Date: All banked TOIL should have a "use by" date. A common and effective approach is requiring it to be used within three to six months of being earned.
Define Booking Procedures: Explain how employees should request to use their TOIL. This process should ideally mirror your standard holiday booking procedure to keep things consistent and ensure you always have adequate team cover.
Calculating and Tracking TOIL Accurately
Once your policy is nailed down, it's time to get into the nuts and bolts of calculating and tracking. Let's be honest, an effective time in lieu system lives and dies by its accuracy. If people can't trust the numbers, the whole thing falls apart, and you’re left with an administrative nightmare. The goal here is to keep it transparent, reliable, and simple for everyone involved.
The most common way to do this is a straight one-for-one swap. An employee works two extra hours, they get two hours of TOIL. It's easy to understand and even easier to manage, which is why it's a firm favourite for many businesses.
However, some companies like to offer a premium rate, especially for work done during unsociable hours. It’s a great way to show you appreciate the extra sacrifice.
Standard Rate: One hour of overtime equals one hour of time in lieu. Simple.
Premium Rate: One hour worked on a weekend or bank holiday might be worth 1.5 hours of TOIL. This sweetens the deal and properly acknowledges that not all overtime is created equal.
Choosing Your Tracking System
With your calculation method sorted, you need a solid system for logging and monitoring those accrued hours. What you choose really depends on the size of your team, but one thing is non-negotiable: accuracy.
For a tiny team where one manager sees everything, a basic spreadsheet might just about do the job. It costs nothing and is quick to set up. But it’s also a magnet for human error, offers zero real-time visibility, and quickly becomes a tangled mess as you grow. The manual data entry alone can become a serious time sink.
As soon as your team starts to scale, automated systems become a necessity. A dedicated HR platform or an absence management tool takes all the manual work off your plate. These systems handle the entire process, creating a clear, auditable trail from the moment extra hours are logged right through to when the time off is taken.
The infographic below shows the simple, three-step flow a good system should give you.
This clean process makes sure every single hour of TOIL is properly signed off and accounted for, leaving no room for confusion.
Why Automation Is a Game-Changer
Automating your TOIL tracking does more than just save you a few hours here and there. It creates a single source of truth that everyone—employees and managers—can see, which builds trust and cuts down on arguments over balances.
An automated system gives you an accurate, real-time picture of your TOIL liability. This is vital for financial planning and helps managers ensure leave is actually being used, preventing massive buildups that can throw team schedules into chaos and hit the company's bottom line.
By ditching the manual methods, you’re empowering your team. Employees can check their own balances and request time off without any guesswork. For managers, it means approvals are a breeze and pulling reports takes a few clicks, not a few hours spent battling with spreadsheets. It’s about freeing everyone up to focus on the work that really matters.
Weighing the Pros and Cons of Offering TOIL
Deciding whether to offer time in lieu is a big strategic call, one that touches everything from your company's finances to its culture. Get it right, and a TOIL system can be a fantastic tool for flexibility. But it’s definitely not a one-size-fits-all solution, so it pays to look at it from all angles before jumping in.
On the one hand, the advantages are pretty clear. TOIL gives you a flexible way to handle busy periods without the payroll headache of paying cash for overtime. For many businesses, that kind of financial predictability is a huge win.
For employees, the payoff is often more personal. The chance to bank extra time off to recharge, deal with life admin, or just grab a long weekend can feel far more valuable than a few extra pounds in their payslip. This sort of flexibility can do wonders for morale and help your team strike a much healthier work-life balance.
Compelling Benefits for Businesses and Staff
One of the most immediate perks of a time in lieu system is how it helps manage costs. When you offer time off instead of cash for those extra hours, you can keep your labour budget stable, even when things get unexpectedly hectic. It's a great way to maintain productivity without blowing your budget.
Beyond the numbers, TOIL gives employees more say over their own time. Having a bank of hours they can draw on means team members can properly switch off and recover after a big project, which is a powerful way to fend off burnout. That sense of autonomy can foster a much more positive and loyal workforce.
Potential Pitfalls to Consider
Of course, offering TOIL isn't without its risks. The most obvious one is that some employees would simply rather have the money. For staff who count on overtime pay to top up their income, a TOIL-only policy can feel like a raw deal and might even dent their motivation.
Another major risk is the quiet build-up of unmanageable leave. If employees start stockpiling huge amounts of TOIL, it can become a significant liability on your company's balance sheet. It also creates a scheduling nightmare when several people try to use their banked time at once, leaving you seriously short-staffed.
The real challenge with TOIL boils down to administration. Without a crystal-clear policy and a reliable way to track it, you open the door to confusion, arguments, and a culture where working excessive hours becomes the norm, not the exception.
The growing appetite for flexible work is also changing how people view TOIL. A recent survey of UK workers revealed a strong preference for compressed workweeks, with nearly half favouring four longer days over the standard five. This shows just how much today’s workforce values their time off, making a well-managed TOIL system more attractive than ever. You can learn more about these worker preferences in the UK.
Common Questions About Time in Lieu
Even with a rock-solid policy, TOIL can throw up some tricky real-world questions. It's one thing to have the rules written down, but another to know how they apply day-to-day.
Let's clear up a few of the most common queries we see from both managers and their teams.
Can an Employer Force an Employee to Take TOIL?
In short, no. If an employee's contract says they get paid for overtime, you can't force them to take time in lieu instead. The whole system hinges on mutual agreement.
It's a two-way street. The arrangement needs to be agreed upon beforehand, ideally spelled out clearly in the employment contract or your TOIL policy. Just as an employer can't force TOIL, an employee can't demand it if the company's standard practice is to pay for extra hours. Clarity from the start prevents any misunderstandings later.
What Happens if TOIL Is Not Used Before an Employee Leaves?
This is a big one, and it's where a vague policy can cause real headaches. If an employee hands in their notice with a bank of TOIL hours, what you do next depends entirely on what your policy says.
You generally have two sensible options:
Payment in Lieu: The cleanest approach is to pay out the value of the unused TOIL hours in their final payslip.
Taking Time During Notice: You could require the employee to use up their accrued hours during their notice period, but only if it's practical for the business.
Without a clear clause covering this, you’re walking into a potential dispute over their final pay. It's far better to have this documented so everyone knows where they stand, ensuring a smooth and professional exit.
Your TOIL policy's termination clause isn't just admin—it's essential protection. It cuts out ambiguity, ensures departing staff are treated fairly, and seriously reduces the risk of a claim down the line.
Is There a Limit on How Much TOIL Can Be Accrued?
While UK law doesn't set a specific cap on how much time in lieu someone can build up, letting it grow indefinitely is asking for trouble. It's highly recommended that you set a reasonable limit in your policy.
Setting a cap protects the business from two major risks: building up a huge financial liability and facing operational chaos when several people want to take a lot of time off at once. A typical limit might be around one or two weeks' worth of hours, which also encourages people to actually use their banked time regularly.
It's also a wellbeing issue. A cap discourages a culture where working excessive extra hours becomes the norm, helping to protect your team from burnout.
Can TOIL Be Used to Cover Sickness Absence?
As a general rule, no. TOIL is earned as a reward for extra work and is meant to be used like annual leave—for planned time off. It's not a substitute for sick pay.
When an employee is unwell, that absence should be managed through your company's sickness policy and the rules around Statutory Sick Pay (SSP).
Dipping into TOIL to cover a sick day blurs the lines and messes up your records. It’s vital to keep these two things separate to meet your legal duties for sick pay and manage employee health properly.
TOIL: A reward for going above and beyond, taken as planned leave.
Sickness Absence: Unplanned time off for illness, covered by sick pay.
Keeping that distinction clear makes everything fairer and more accurate for everyone involved.
Managing Leavetrack makes tracking every type of absence, including time in lieu, simple and transparent. Our system provides a clear, real-time view of TOIL balances, automates accruals, and handles approval workflows, eliminating spreadsheet errors and saving valuable administrative time. Discover how Leavetrack can bring clarity and control to your absence management.
