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What does Time Off in Lieu Mean?

Time in lieu is leave allocation granted for working outside of regular hours. “In lieu” literally means “instead of.” Under English law, time in lieu means time off instead of paying for overtime.

This concept is also recognised under Singaporean employment laws, which allow employees to take time off in exchange for working overtime under specific conditions.

Why Give Time Off in Lieu?

Working patterns have changed in the modern era of technology, especially post-COVID. New ways of working, managing teams, and running businesses have evolved. 

Traditional 9-to-5 hours are becoming less common as companies adopt more flexible options to attract and retain employees in the 21st century.

Employees may sometimes need to work additional hours or days with people working irregular hours. There is no legal right to be paid for these extra hours unless it ensures the minimum wage is met. Unpaid overtime is rarely well-received, and if it becomes a regular occurrence without recognition, it can lead to unhappy employees.

Often, budgets don’t allow for compensating employees for extra hours worked, particularly when cash flow is tight. Therefore, to adopt fair practices without causing financial strain on the employer, time off in lieu (TOIL) is offered to employees working extra hours.

TOIL is a business strategy for managing costs and supporting employees in maintaining a work-life balance. It is most commonly used in environments requiring flexible working hours.

Higher-paid employees generally prefer time off instead of extra pay for their overtime, especially when handling busy periods or large orders.

How Does Time Off in Lieu (TOIL) Work?

The employer agrees in writing to offer TOIL to an employee. This can’t be enforced or assumed by the employee. Once agreed upon, a copy of the agreement must be kept in the employee’s personnel file. There is no need for a written agreement every time; the initial agreement suffices. The employee can then bank this time for future use, with the date for using these hours usually recorded as the end of the business or financial year.

Time off in lieu in the UK

TOIL is regulated according to the UK Working Time Regulations, which state that no employee can work more than 48 hours a week unless they have signed a written opt-out agreement. This includes overtime and limiting the amount of extra work employees can do.

Time off in lieu in Singapore

In Singapore, the Employment Act governs time off in lieu. Under this law, employees who work beyond their contractual hours are entitled to compensation, which can be overtime pay or time off in lieu.

The Ministry of Manpower stipulates that employees should receive time off equivalent to the extra hours worked, which must be taken within a specific period agreed upon by both employer and employee.

Creating a TOIL Policy

The written agreement allowing time in lieu can be a separate document or included in the employment contract, with a copy on file. To prevent employees from accruing excessive time off, a clause should state the maximum amount of TOIL they can accrue and the deadline by which they must take it. The strictness of these parameters depends on the employer, and both parties need to agree on them.

Compensatory Time Off in Lieu of Overtime Pay

Depending on their circumstances, employees may prefer an alternative to time off in lieu. The employee should be discussed to decide the best option, whether time off in lieu or regular overtime pay.

Advantages of Offering TOIL

Gives You Time Back: This is particularly true for higher-paid employees for whom money is less important than time, especially after demanding periods.

Keeps Costs Under Control: TOIL helps manage costs when paying overtime isn’t feasible, benefiting the employer and the employee during financially challenging times or staff shortages.

Disadvantages of Offering TOIL

Tough to Implement Consistently: It can be challenging to enforce or assume that employees will agree to TOIL over overtime pay. Lower-paid employees or those in specific sectors may prefer extra pay.

Difficult to Measure Indirect Costs: Offering TOIL incurs an expense for the employer, as time off might be taken at inconvenient times. Regularly relying on extra hours without adequate compensation leads to larger business issues that need addressing.

Terminating a Contract and Paying Time in Lieu

When terminating a contract, paying time in lieu can be crucial. Employers might opt to compensate employees for their unused TOIL rather than grant additional leave, particularly if the employment relationship is ending.

In the UK, it is essential to clearly outline the terms for payment in lieu of unused TOIL in the employment contract or through a separate written agreement. This ensures that both parties understand the obligations and rights concerning the payout of accrued TOIL. Employers should ensure compliance with relevant employment laws and regulations to avoid disputes.

Similar principles apply in Singapore under the Employment Act. Employers must ensure that any payment in lieu of unused TOIL is calculated fairly and in accordance with the agreed terms. This practice helps maintain a fair and transparent approach to ending employment relationships.

For more detailed information and guidance on creating a termination letter that includes payment in lieu, see: Terminate a contract with Payment in Lieu

Off in Lieu Meaning

“In lieu” literally means “instead of.”

A TOIL policy’s effectiveness depends on the needs of your employees, workplace values, and priorities. Employers should be open and transparent with employees, seeking their feedback and agreement. 

When used effectively, TOIL offers a fair and mutually beneficial way to manage costs and staff demand during busy periods. Proper management and consideration of individual employee preferences are essential for TOIL to be successful.