What is time off in lieu (TOIL)? A guide for UK employers

In general, UK employees cannot work more than 40 hours in any one week. Under the Working Time Regulations, employers must ensure that working hours remain within legal limits, making it essential to track and compensate overtime appropriately. Time off in lieu (TOIL) is one option businesses use to manage this, offering time off instead of additional pay.

In this guide, we’ll explain what time off in lieu is, how it works in practice, and the rules employers need to be aware of. We’ll also explore how TOIL compares to overtime pay, how to calculate it accurately, and share practical tips for creating effective policies and managing TOIL effectively within your business.

What does time off in lieu mean?

Time off in lieu (TOIL) means that employees receive paid time off instead of overtime pay when they work extra hours beyond their contracted schedule. Rather than compensating additional time through wages, employers allow employees to take this time back as leave at a later date.

Lieu time is commonly used in roles where workloads fluctuate or where offering overtime pay is not standard practice. It can provide a flexible way to manage additional hours while supporting employee wellbeing and helping businesses control payroll costs.

How are lieu days earned?

Common situations where lieu days may be earned include:

• Working beyond standard daily or weekly hours

• Covering extra shifts or responsibilities

• Attending meetings or events outside normal working hours

• Working evenings or weekends when not part of the regular schedule

To avoid confusion, it’s important that any additional hours are approved and recorded in advance, ensuring transparency for both the employer and employee.

When can employees take TOIL?

Employees can usually take TOIL at a later date, subject to agreement with their employer and the needs of the business. The process for taking time in lieu is often similar to booking annual leave.

Typically:

• Employees request time off in advance

• Employers review requests based on workload and team availability

• Approval is granted in line with company policy

Many employers also set rules around when time off in lieu must be used, such as within a fixed timeframe, to prevent large balances from building up.

What are the rules for time off in lieu?

There are no specific statutory rules that govern time off in lieu (TOIL) in the UK, but employers must ensure that any arrangement complies with broader employment law. This includes the Working Time Regulations, which set limits on weekly working hours and outline minimum rest breaks and holiday entitlements.

In practice, this means that while employers can offer hours in lieu instead of overtime pay, the terms must be clearly defined and applied consistently. Without established guidelines, TOIL can lead to confusion around entitlement, tracking, and when time off can be taken.

Is TOIL a legal requirement in the UK?

Time off in lieu is not a legal requirement in the UK. Employers are not obligated to offer TOIL, and there is no automatic right for employees to receive time off instead of overtime pay.

Instead, TOIL is typically offered at the employer’s discretion and should be agreed as part of:

• An employment contract

• A workplace policy

• Or a collective agreement

However, even where TOIL is used, employers must still comply with key legal requirements. For example:

• Employees must not exceed the average 48-hour working week (unless they have opted out)

• Minimum rest breaks must be respected

Pay must not fall below the National Minimum Wage when averaged across hours worked

What should a TOIL policy include?

A well-defined time off in lieu policy should include:

• Eligibility: who can earn TOIL and under what circumstances

• Approval process: whether extra hours must be authorised in advance

• How hours are recorded: systems or processes for tracking hours in lieu

• How TOIL is calculated: whether it follows a 1:1 ratio or another method

• When TOIL can be taken: including notice periods and approval requirements

• Expiry rules: deadlines for using accrued TOIL

Time off in lieu vs overtime pay

When employees work beyond their contracted hours, employers typically choose between offering time off in lieu (TOIL) or paying overtime. Both approaches compensate for additional work, but they differ in how that compensation is delivered and how it impacts both payroll and employee experience.

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⚠️ Watch out: Whichever approach you choose, always check that pay for all hours worked, including any additional hours, doesn't fall below the National Minimum Wage. This applies even where overtime is unpaid and TOIL is offered instead in line with ACAS guidance.

What is the difference between TOIL and overtime?

The key difference between TOIL and overtime lies in how employees are compensated for extra hours worked.

• Time off in lieu (TOIL) allows employees to take paid time off later, based on the extra hours they have worked (often referred to as hours in lieu)

• Overtime pay compensates employees financially, usually at an increased hourly rate

Which option is better for employers and employees?

There is no one-size-fits-all answer, as the best option depends on both business priorities and employee preferences.

For employers, time off in lieu can be a cost-effective way to manage overtime, particularly during busy periods, as it avoids increasing payroll expenses. It can also support employee wellbeing by encouraging time off after periods of high workload.

Overtime pay, on the other hand, is simpler to administer and may be preferred in roles where additional hours are frequent or unpredictable. It provides immediate compensation, which some employees value more than time off.

How to calculate time off in lieu?

At its core, TOIL is based on the number of extra hours worked, which are then converted into time off to be taken at a later date.

To manage this effectively, businesses should define how hours in lieu are calculated and recorded within their time off in lieu policy. This helps avoid confusion and ensures employees understand how much time they are entitled to.

How is TOIL calculated for extra hours?

In most cases, TOIL is calculated on a 1:1 basis, meaning that for every additional hour worked, the employee earns one hour of time off.

For example:

• 1 extra hour worked = 1 hour of TOIL

• 4 extra hours worked = 4 hours of TOIL

However, some employers may choose to offer enhanced TOIL rates, depending on their policy. For instance:

• 1 hour worked = 1.5 hours of TOIL (for weekends or evenings)

What is a good example of a TOIL calculation?

A simple example can help illustrate how TOIL works in practice.

Example:

An employee is contracted to work 40 hours per week but works an additional 6 hours during a particularly busy period.

If the company uses a standard 1:1 TOIL policy:

• 6 extra hours worked = 6 hours of TOIL

This means the employee can take:

• 6 hours off at a later date

• or, for example, leave early on one day or take part of a day off

If the company offers an enhanced rate (e.g. 1.5x for weekend work):

• 6 hours worked = 9 hours of TOIL

This gives the employee more flexibility in how they use their accrued time.

Can TOIL be paid instead of taken?

There are situations where TOIL may be paid instead of taken. This depends on the employer’s approach and the employee’s circumstances, particularly where taking time off is not practical or possible.

When it comes to time in lieu for salaried employees, TOIL is often used as a flexible way to recognise additional hours without offering overtime pay. Whether this time can be converted into pay should be clearly defined by the employer, ensuring consistency and transparency across the organisation.

What is payment in lieu?

Payment in lieu refers to compensating employees financially instead of providing time off. In the context of TOIL, this means paying employees for any accrued time rather than allowing them to take it as leave.

It’s important to distinguish this from “payment in lieu of notice” (PILON), which relates to ending employment. Here, payment in lieu simply refers to settling unused TOIL through payroll.

While not always standard practice, some employers may offer payment in lieu where taking time off is not feasible or where alternative arrangements have been agreed.

When might employees receive payment instead of TOIL?

Although TOIL is usually taken as time off, there are certain situations where employees may receive payment instead.

These may include:

• When an employee leaves the business with unused TOIL remaining

• When operational demands make it difficult to take time off

• When there is a prior agreement allowing flexibility between time and pay

How should employers manage time off in lieu?

To ensure TOIL works as intended, businesses should establish guidelines around how extra hours are approved, recorded, and taken as leave. This helps prevent misunderstandings and ensures fairness across teams. A well-managed approach helps maintain a healthy balance between operational needs and employee wellbeing. It also supports accurate payroll processes, particularly when managing overtime alongside leave, including hown holiday pay and overtime are handled in the UK. Ultimately, successful TOIL management depends on having the right systems in place and making expectations clear from the outset.

How can businesses track and manage TOIL effectively?

To manage TOIL effectively, employers should:

• Use a centralised system to record additional hours worked

• Require approval for overtime before it is carried out

• Ensure employees can easily view their TOIL balance

• Set deadlines for when TOIL should be taken

• Align TOIL requests with existing leave processes

Many businesses rely on payroll software or integrated HR systems to streamline this process. These solutions can automatically track extra hours, calculate TOIL balances, and provide real-time visibility for both employers and employees.

What are common challenges with TOIL?

Even with the best intentions, TOIL can become a source of tension if it is not actively managed. The most common issues tend to arise from a lack of clarity at the outset, whether in the policy itself or in how it is communicated to staff.

Common issues include:

• TOIL balances building up when employees do not take time off regularly

• Lack of visibility, making it difficult to track accrued time accurately

• Inconsistent application across teams or departments

• Disputes over hours worked, particularly if they were not approved in advance

• Operational difficulties, where employees request time off during busy periods

Time off in lieu (TOIL) can be a valuable tool for managing overtime, offering flexibility for employees while helping employers control payroll costs. However, to be effective, it requires robust policies, consistent tracking, and a structured approach to ensure fairness and compliance. Using a payroll or HR solution can further simplify the process, helping businesses ensure that TOIL is handled efficiently, transparently, and in line with best practice.