When the requirements of your business calls for overtime, offering your employees time off in lieu (TOIL) as an alternative to overtime pay is a great way of cutting costs without undermining trust and confidence in your workforce.
Whether you’re dealing with the heavy crunch period due to looming project deadlines, or a seasonal uptick in business, here’s a useful guide to the pros and cons to help you make the most of a TOIL policy.
What is time off in lieu (TOIL)?
Time off in lieu (otherwise known as TOIL) is the agreement whereby an employer gives their employees paid time off, rather than extra pay for the hours of overtime they have worked. TOIL gives employees an additional holiday allowance to compensate for extra hours worked, allowing them to take the time off worked at a later date.
There is no legal requirement for TOIL (provided the minimum wage requirements are met), with the terms of TOIL being agreed upon between the employer and employee. This gives companies some latitude when utilising time off in lieu policies, although it should be noted that it cannot be assumed or enforced, requiring an agreement in writing between the employer and employee.
Let’s take a closer look at some of the advantages and disadvantages of time off in lieu policies.
Advantages of TOIL
1. Helps keep costs under control
Perhaps the most obvious and immediate benefit of implementing time off in lieu policies is the reduction or removal of overtime costs. Offering TOIL allows companies to save money, while avoiding exerting undue pressure on employees by giving them “banked time”.
While employees still receive their regular salary, the employer can avoid additional costs, which can be particularly useful when companies are facing tight deadlines or seasonal pressures. With the costs of paying overtime fraught with controversy, offering TOIL is a sensible and cost-effective alternative.
2. Prevents employees from becoming overworked
By giving employees greater control over their unscheduled absences, TOIL policies offer them more freedom to manage their time off and empower them to make decisions about their personal needs. Employees with particularly heavy workloads during the final stages of a project or those on high salaries are especially likely to prefer the option of TOIL in place of overtime wages.
Provided it isn’t overused, TOIL allows employees to strike a better work-life balance, taking the time off at their discretion, while also giving employers greater control over unscheduled absenteeism.
3. Builds a culture of trust
An effective and clearly communicated policy of TOIL is a great way to help foster a culture of trust within a company. As the TOIL policy is a direct agreement between an employer and their employees, it establishes a position of understanding, underscoring a sense of “give and take” and fostering a commitment from employees to work with leaders to ensure overtime is covered.
Companies should ensure that these policies are open and transparent, with managers communicating with their employees to understand their views and gather feedback. Above all, a well implemented TOIL policy demonstrates your company’s understanding of the value of your employees’ time, particularly following on from a demanding period of overtime.
4. Optimise efficiency by tracking and monitoring TOIL
An advantage of TOIL policies is that they can be easily tracked and monitored by your company’s performance management and HR tools. By establishing a system of recording, approving and tracking your employees’ overtime and time off in lieu, managers and leaders can streamline the process while reducing unnecessary time spent on administration.
Handling overtime and TOIL manually can be cumbersome, time-consuming and is more prone to error, so managing this through a digital platform is essential for companies that want to stay ahead of the curve.
Disadvantages of TOIL (and how to avoid them)
1. TOIL rules can be confusing
In order for a time off in lieu policy to be effective, they need to be clearly understood by both the management and employees. Companies who fail to clarify whether or not employees are happy to work under this system, rather than receive overtime payment, reduce trust while creating confusion about what is expected of their workers.
Both employers and employees should be fully aware of the rules for opting out of the maximum working week. The terms and conditions of time off in lieu should be agreed in writing to ensure maximum clarity, either as a part of the employment contract or alternatively for individual one-off arrangements or as part of the employee handbook. These rules should be available for all employees to view at any time, for instance on the company’s intranet.
Finally, be clear on the expiry of the TOIL, for instance if this time needs to be taken off within a particular time-frame, so that employees are aware of any restrictions they face when scheduling future holidays.
2. There is no “one size fits all” solution
While TOIL is a great tool for certain employees under certain circumstances, it is not a “one size fits all” solution across the entire workforce. For some positions, such as receptionist, time off in lieu policies may be unworkable. Additionally, in some sectors of the workforce, for instance employees on low incomes, overtime payment may be their preferred option, so TOIL can’t be used as a top down approach as a universal alternative.
Managers should consider the needs of their employees on a case by case basis, factoring in the nature of their work, the individual circumstances of various members of staff and whether they prioritise time off or financial compensation for their overtime.
3. Overtime becomes the norm
TOIL should always be used as sparingly as possible to avoid potential burnout from excessive overtime. If your workers are working overtime on a regular basis – with TOIL a consistent aspect of their schedule – then you need to consider looking into other aspects of the workplace. Are your teams understaffed? Do employees require additional training or support to overcome issues of efficiency or productivity?
Used liberally, TOIL can inadvertently create a culture whereby working overtime becomes the norm, particularly in industries where projects regularly overrun. Managers should ensure that TOIL is strictly monitored to prevent excessive build-up of days owed to staff, while ensuring overtime is kept to a manageable level.
4. Employees can potentially abuse the system
TOIL policies can be open to potential abuse from employees, particularly if there is a lack of clarity regarding the details of your company’s best practices. Some employees might be tempted to try and use time off in lieu to supplement their regular holiday allowance, claiming to be overworked and hoping for additional overtime and TOIL.
Keeping track of employees’ overtime worked and time off in lieu using a comprehensive performance management and HR tool is essential to ensure that the system isn’t abused and that both managers and employees become aware of any potential issues as soon as they arise which could be resolved using alternative solutions.