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Start a free trialTaking time off is so important, but it can be hard to imagine how to make that work, especially in small businesses — where you’re even more likely to experience sudden busy periods or frequently need to pull together to meet deadlines with limited resources.
One way to make those busy periods feel more rewarding is to offer time off in lieu. Unlike overtime pay which can quickly get expensive for small business owners, time off in lieu is inexpensive and an equally positive way to show appreciation for team members that have helped out.
In this guide we’ll explore what time off in lieu is, how it works, why it’s worth introducing, and how to put together a simple TOIL policy for your small business.
Time off in lieu (also known as TOIL or time off in lieu of overtime) is where an employee works additional hours, in agreement that they can take that time off in the future. Instead of being paid overtime, they essentially bank some extra annual leave to be used when it suits them.
TOIL works well if you’re experiencing a busy period and need more people to pitch in and help out. In the absence of overtime pay, offering time off in lieu is a good way to encourage people to adjust their usual work schedule to meet the needs of the business.
Managers and employees can agree when to offer and use TOIL, and it’s useful to have a time off in lieu policy that explains how it works in a clear and transparent way.
Some people are put off the idea of offering time off in lieu because it seems complicated to calculate, or difficult to manage. It doesn’t have to be, though. With one calculation, you can offer this benefit in a straightforward way.
To calculate time off in lieu, use this formula:
You can adjust this to reflect half days or days if that’s more appropriate to the way that your company works.
You could even decide to increase the number of hours of TOIL offered in some cases — for example if you’re requesting overtime on a weekend, on a bank holiday, or at short notice. If you go down this route, make it part of your TOIL policy so that it can be applied fairly.
While there’s no specific law that covers offering time off in lieu, there are some regulations you should be aware of when it comes to working hours, contracts, and minimum wage.
The Working Time Regulations 1998 govern working hours in the UK. One of the key points is that no employee can be forced to work more than 48 hours per week without prior agreement.
As per UK government guidelines on weekly working hours, employee’s contracts should specify whether the company offers TOIL or overtime pay. If you want to attract and retain the best talent, they should be compensated for their commitment — whether that’s in extra leave time or extra pay.
Minimum wage is important to consider here as well. Even with TOIL, workers must earn at least the National Minimum Wage (NMW) for the total average of overtime hours worked. It’s essential that you take this into consideration when calculating hours worked and pay.
Introducing time off in lieu to your small business has plenty of benefits — including saving money and improving work-life balance. Here are some of the main positives for small businesses:
One of the major advantages of offering TOIL is that it can save your company money — especially if you currently offer overtime pay or need to invest in agency staff to cover busy periods. Both overtime rates and agency pay are significantly more expensive than TOIL, which doesn’t cost you money — only time.
For small businesses with a tight budget, time off in lieu offers you a way to motivate employees to pick up an extra shift or work longer when you can’t give a financial incentive. This way of managing time off in small businesses is often preferred for this reason.
In companies where TOIL is offered, employees have greater flexibility and can enjoy a more personalised work-life balance. Instead of having to carefully consider when to use their valuable annual leave, they can instead choose to work more hours in one period to bank some extra time off elsewhere.
This flexibility is especially useful for employees that are planning a big holiday, a wedding, or a house move. It’s also ideal for life’s smaller moments too — like wanting to extend a weekend, enjoy brunch with friends, or travel to watch a show.
Access to time off in lieu gives employees more autonomy and the chance to recharge their batteries when it suits them best. This can lead to greater employee satisfaction and higher employee retention rates.
Business doesn’t run in a smooth, straight line, and sometimes you’ll encounter an especially busy period or a tight deadline. When things get busy, employees can work extra hours or on weekends to help you get things done, then use their TOIL to take extra days off when the work is done.
Offering TOIL allows you to increase resources when you need them, maintain productivity, and deliver against targets or deadlines. In return, your employees know that they can take a well-deserved rest.
Having a TOIL policy is also important for legal compliance. A clear policy helps you avoid legal disputes and stay compliant with UK employment laws.
If your company culture has themes of wellness or work-life balance, then adding a time off in lieu policy can help you put those values into action. A TOIL policy demonstrates that you value your employees’ extra support and are happy to recognise their commitment by offering them time off to use when it suits them.
A time off in lieu policy works well alongside other HR policies that promote work-life balance and employee wellbeing — like a mental health policy, hybrid working policy, or a birthday leave policy.
A time off in lieu policy isn’t a legal requirement for UK businesses, but it is something we recommend you invest in. Having one document that explains your approach to TOIL, how to use it, and any limitations saves you time, energy, and potential complaints in the long run.
Your time off in lieu policy should explain:
While you could roll this information into your wider annual leave policy, it’s easier for employees to find the information they need if you create a standalone TOIL policy.
Once you’ve written your company policy for TOIL, make a note to review it every 6-12 months. This allows you to spend some time considering whether you want to make any adjustments to the TOIL rate, exclusion dates, cut off dates, or whether you want to change your approach to TOIL and overtime pay entirely.
At Charlie, we operate on a 9 day fortnight. This means our employees take every other Friday off, and we have a Deep Work Wednesday where we’re encouraged to limit meetings and take time to focus on deep work.
Our employees aren’t paid less because of this arrangement, or expected to work compressed hours to complete their standard 40 hour work week in fewer days.
Time off in lieu is also offered in some cases. For example, some customer-facing teams require someone on standby in case a customer needs help. Team members that cover non-standard working hours are then given TOIL to be used on another day.
Offering time off in lieu to employees is an ideal way to support your small business through busy periods — especially if you don’t have the budget for overtime pay. Use this guide to help you consider the benefits and put together a simple TOIL policy that outlines your approach to working overtime.
If the idea of adding another type of leave to your business feels like too much work, consider using HR software to eliminate most of the repetitive, day-to-day HR admin — including managing time off. Charlie can help you simplify those HR tasks so you’re free to focus on your highest value work.
Have a question about time off in lieu or TOIL policy? Here are some questions we hear often, along with our best advice on the topic.
Time off in lieu works by giving an employee additional time off in the future, in return for working overtime. This should be agreed between the employee and their manager, in line with the company’s TOIL policy if there is one. Time off in lieu policies often outline how many TOIL hours are accrued for the time worked, when this can or can’t be taken, and when TOIL expires.
Time off in lieu should be recorded alongside other types of leave in the employee’s record and/or in their timesheets. To simplify this, use HR software for small businesses that allows you to manage and automate leave requests (including TOIL requests) in a more effective way — like Charlie.
An employer can’t force an employee to do anything that isn’t outlined in their employment contract or terms of employment, and that includes when to take TOIL days. A reasonable TOIL policy should explain that employees are free to take TOIL at a later date when it’s most useful for them, although there may be some limitations around specific busy periods or the amount of notice requested.
TOIL is definitely a worthwhile benefit for small businesses to introduce. It offers a cost-effective alternative to paid overtime, and gives you a more attractive way to encourage employees to adjust their work schedules temporarily to help out in busy periods.
