TOIL Policy UK: Time Off in Lieu Explained

TOIL stands for Time Off in Lieu. It means giving employees paid time off instead of overtime pay when they work extra hours. It's a popular arrangement in UK businesses, but without a clear policy it can quickly become messy. This guide explains how TOIL works, the legal position, and how to manage it properly.

How does TOIL work?

The concept is simple:

1. An employee works extra hours beyond their contract (e.g., stays late to finish a project).
2. Instead of being paid overtime, they "bank" those hours as TOIL.
3. They take the equivalent time off at a later date.

For example, if an employee works 3 extra hours on a Tuesday evening, they can take 3 hours off later that week or the following week.

Is TOIL a legal requirement?

No. There is no legal requirement in the UK to offer TOIL or to pay overtime. The only legal requirement is that:

• The employee's average pay must not fall below the National Minimum Wage when extra hours are included.
• The employee must not work more than an average of 48 hours per week (unless they've opted out of the Working Time Regulations).

TOIL is an arrangement between employer and employee. It should be documented in a policy or employment contract.

What your TOIL policy should cover

1. Eligibility

Define who can accrue TOIL. Typically salaried employees, not those already paid overtime rates.

2. Pre-approval requirement

State that overtime must be pre-approved by a manager before it qualifies for TOIL. This prevents employees unilaterally deciding to work late and banking hours.

3. How TOIL is accrued

Clarify the rate: is it hour-for-hour (most common) or a different ratio? Some companies offer 1.5× for weekend work, but hour-for-hour is standard.

4. Maximum TOIL balance

Set a cap, for example a maximum of 16 hours (2 days) of banked TOIL at any time. This prevents employees accumulating weeks of TOIL.

5. When TOIL must be used

There is no legal deadline for using TOIL, so any deadline comes from your agreement, for example within 3 months of being earned. Explain it in advance, make it practical to take the time, and say what happens to hours that are still unused.

6. How to request TOIL

TOIL should be requested and approved through the same process as annual leave.

7. What happens when someone leaves

State whether unused TOIL is paid out when employment ends, and agree the calculation with payroll. Do not assume unused hours simply disappear.

TOIL vs overtime pay: which is better?

• TOIL benefits employers: no additional payroll cost, just time shifted.
• TOIL benefits employees: flexibility to take time off when they need it.
• Overtime pay is simpler: no tracking of banked hours, no expiry dates to manage.
• TOIL requires tracking: without a system, disputes over banked hours are common.

Common TOIL pitfalls

1. No pre-approval: employees working late without authorisation and expecting TOIL.
2. No cap: an employee banks 40 hours of TOIL and wants two weeks off.
3. No expiry: TOIL builds up indefinitely, creating a liability.
4. Tracking in spreadsheets: errors, disputes, and no audit trail.
5. Minimum wage breach: if extra hours push average pay below NMW, you have a legal problem.

How to track TOIL

Whatever tool you use, a TOIL record needs the date of the extra work, the hours worked, the hours credited under your agreement, who approved the credit, and every booking that uses the balance. Count pending requests as well as time already taken, or staff will book hours that are already spoken for. Our free TOIL balance calculator and record template shows the arithmetic.

How Leavely handles TOIL

Leavely's TOIL tracker keeps time off in lieu alongside regular leave:

• Manager-recorded accruals: a manager records the date, hours and reason for the extra work.
• Approval before credit: an authorised approver reviews each accrual, and nobody can approve their own.
• Visible balances: employees see their own accrued and remaining TOIL hours.
• Booking the time back: staff request TOIL through the normal leave workflow, and pending requests reserve hours until decided.
• Records: each accrual keeps who approved it and when.