XCD: How to Manage Time Off in Lieu in Your Organisation

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Offering employees their time back in place of overtime pay is a business-savvy solution to accruing hefty overtime pay-outs in busy periods. Many employees, particularly those in more senior positions, prefer to simply receive their time back rather than overtime pay.

Time off in lieu (TOIL) can be a useful option if employees are required to work a day of the weekend or a bank holiday, as they can receive their holidays back at a later date.

However, TOIL can often end up in a cycle of consistently covering employee lieu time and cause confusion when it comes to annual leave entitlements. Due to the common confusion that surrounds TOIL and leave entitlement, time off in lieu has become an age-old headache for HR teams everywhere.

It’s only fair, if an employee works overtime, they should be entitled to their time back, and no employee should be working over 48 hours per week unless they have signed an opt-out document. Unfortunately, there is no concrete legislation on employee reimbursement for extra hours worked, which opens up room for interpretation and confusion. Offering TOIL is often seen as good practice for employers.

So how exactly does time off in lieu work?

Time off in lieu is an agreement between the employer and employee that enables staff member to accrue additional annual leave in proportion with the amount of overtime that they work. TOIL policies vary from organisation to organisation due to the lack of legislation on the matter, but a good TOIL agreement should be included in contracts of employment, factoring in limitations on accruement and a time frame in which TOIL must be taken.

A risk that faces many organisations that offer TOIL is that many employees either forget to take their extra time off or take their TOIL in one fell swoop, leaving staff teams short and in need of cover.

Of course, TOIL comes with both its benefits and shortcomings but offering lieu time in place of extra pay ensures that employees are less likely to burnout through overworking.

Having a well-rested workforce is crucial to maintain morale, productivity and employee engagement. A few extra hours here and there may seem harmless, but if a trend emerges where staff are consistently working over their contracted hours, it raises some serious questions for HR teams.

Be wary if TOIL becomes standard practice in your workplace, as this may indicate that you simply do not have enough employees to handle the workload.

Managing and tracking TOIL effectively is key to ensuring employees don’t end up overworking themselves or abusing the system. Clear communication surrounding the limitations and entitlement to lieu time is the best way to ensure employees manage their overtime well and HR teams aren’t constantly chasing TOIL leave. Offering lieu time can also be a great way to demonstrate your organisation’s attitude to flexible working.

TOIL vs. Holiday Entitlement, what are the key differences?

Time in lieu is often conflated with holiday as the overtime you earn is added to your holiday entitlement. We’ve outlined the key differences below:


Time off in lieu is directly correlated to the amount of overtime an employee works and only accrues in proportion to overtime hours. There is no legislation to enforce TOIL, but most companies will adhere to best practice lieu policies.

Holiday Entitlement

Holiday entitlement is the statutory right of any employee and the minimum in the UK is 28 working days (5.6 working weeks) inclusive of bank holidays. Holiday accumulates throughout an employee’s time in a company, even whilst on parental leave or sickness absence. Holiday entitlement does not accrue in the unfortunate circumstance of an employee taking bereavement or compassionate leave.

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Benefits of TOIL

Health and Wellness benefits of lieu time

Everyone understands how it feels to be tired at the end of the week, but troubling research indicates that overworked staff suffer from an increased risk of long-term health conditions such as chronic fatigue, anxiety and depression.

A recent study from leading academics at University College London indicated that employees that work over 55 hours per week suffer from an increased risk of strokes and heart attacks.

The study also found a correlation between staff who worked over their normal hours and increased alcohol consumption, which exacerbates the underlying health issues of overworked employees, and has a detrimental effect on productivity levels in the workplace.

Offering TOIL in place of overtime pay encourages employees to take enough down time outside of working hours, and encourages a healthy work-life balance for your staff without impacting their pay.

Overworking employees can also lead to an increase in ‘Presenteeism’, a phenomenon where employees are more likely to come into the office feeling unwell than take sick leave. As overworking leads to health issues, offering lieu time has the potential to negate the impacts of an unwell workforce and decrease the amount of sickness absence an employee may need to take.

Financial benefits of time off in lieu

For employers, offering TOIL has the clear benefit of avoiding overtime payments, which can often lead to large pay-outs by offering staff their normal rate of pay, ‘time and a half’ or even double pay for bank holidays. In many cases, this fact alone is enough to sway employers into offering lieu time.

For HR, a key benefit of offering time in lieu is that statutory holiday allowances and holiday pay remain unaffected, saving administrative headaches of calculating individual entitlements for each employee.

Moreover, having a clear TOIL policy in place of overtime enables HR teams to manage employee satisfaction. As staff receive their time back for any extra hours worked, HR avoid unpleasant resentment which may build toward an employer if staff are consistently working additional hours without recognition. Increased employee satisfaction leads to increased employee retention, with the additional benefit of consistency in the workplace and a reduction in expensive recruitment costs.

Common problems of TOIL

Confusion over lieu policies

TOIL is notoriously confusing. As each employee may have to work different amounts of overtime over different periods, tracking that TOIL is taken and accurate is a large task. Confusion may occur over the rules of each company’s TOIL policy, when lieu days can be taken and limitations on just how much overtime an employee can work.

Abuse of time in lieu

Unfortunately, due to the common confusion surrounding lieu time, some employees may abuse the system and log additional hours during lunch breaks and after hours or intentionally take longer on a project to accrue more time. HR teams and line managers should keep an eye on any trend that seems to emerge with particular team members to avoid this.

On the flip side, some employers can use time in lieu to have employees work long and unsociable hours, which has a negative impact on employee welfare and satisfaction. Lieu agreements should be fair and only used where needed, with limitations set out in a contract of employment to negate this abuse of the system.

If an employee would prefer to work longer hours four days a week with the intention of taking lieu day on a Friday, employers should consider shifting the individual’s contracted hours instead.

Untaken lieu time

Ironically, a common problem of offering TOIL in place of extra pay is that employees often do not track their overtime as closely, and often end up not taking their lieu entitlement. This is clearly an issue for employers and HR managers as employees may become overtired and overworked in the long-term, leading to poor performance in the workplace.

How to manage TOIL in your organisation

Having a clear and firm lieu policy in place is the most important and effective means of managing TOIL for your workplace. Enforcing detailed rules and transparent policies enables employees to keep track of their valuable annual leave.

Outline lieu entitlement in the contract

Clear guidelines and the parameters of your lieu policy should be laid out in your contracts of employment to clearly indicate how and when TOIL can be taken for your staff teams.

Contracts are effective in clearly setting out lieu time in a way that benefits both the employer and employee. Inherently, lieu time is an agreement, so the terms of that agreement should be mutually beneficial. Placing lieu policy in the contract decreases confusion, room for error and keeps both parties happy.

Track time and entitlement accurately

Accurate time and overtime tracking enables HR teams to calculate TOIL effectively. Yet, monitoring the overtime hours across a whole staff team is a challenging task, and HR are only human, so someone is bound to fall through the net.

Empowering your business’ HR processes with intuitive self-service software makes it easy for employees to input their own timesheets and managers to see exactly how many extra hours have been worked by which individuals.

XCD Time and Expenses software streamlines time tracking processes for HR teams with automated leave calculations embedded in the software to eliminate any human error in overtime pay.

Overtime approvals

Obviously, you trust your staff team, but there’s a fine line between ensuring productivity and the quality of work. Requiring employees to have their extra hours on a project approved by a line manager enables employers to be aware of exactly how much overtime is needed and where to complete the workload.

With customisable authorisation levels, XCD overtime tracking features provides complete transparency in the amount of overtime completed and enables all parties to see exactly how much lieu time is necessary.

When can employees take their time in lieu?

Establishing the time frame in which employees can take their lieu time is important for employers to mitigate the chances of their staff teams being on TOIL leave for extended periods of time. Untaken TOIL can place a massive strain on employee motivation, so employers should incentivise staff to take their well-earned time in lieu by placing limitations of when this extra holiday can be taken.


Take the headache out of TOIL and overtime calculations

Using XCD software to automate, integrate and streamline your time tracking processes saves large amounts of administrative time, ensures complete transparency over extra hours worked and enables HR teams to focus on optimising workforce progression and development.

Using intuitive self-service through our convenient mobile app, XCD software allows all staff members to see exactly how much annual leave they are entitled to in relation to their hours and any lieu time they may accrue.

To get started on streamlining your annual leave calculations and HR admin, book a demo and see exactly how XCD could be your business’ all-in-one time tracking software solution. Alternatively, get in touch if you have any further questions regarding TOIL, or just about anything HR-related!