You might be familiar with the term “in lieu”, a French term that generally translates to “in place” or “instead” of.
Time in lieu, also known as time off in lieu or TOIL, refers to an employee’s entitlement to take time off from work in place of or instead of receiving overtime pay for the additional hours they worked outside of the normal hours they are contracted to work.
As a business owner, you might be wondering how you can best manage busy periods where your employees may need to work longer hours to complete projects. Implementing time in lieu arrangements can have several advantages in your workplace, for both you and your employees.
From managing costs and enabling improved flexibility in working hours, read on to find out more about time in lieu arrangements and what it means for your business.
What’s The Difference Between Overtime and Time In Lieu?
Time in lieu is essentially an alternative to overtime pay an employee would normally be entitled to.
What is considered ‘overtime’ will generally vary according to the terms of any relevant industry modern award or enterprise agreement that applies to your business.
Typically, employees will be entitled to be paid overtime rates if they perform work that is either:
- More than their ordinary hour of work.
For example, the ordinary hours for most full-time employees will be 38 hours per week (plus any reasonable additional hours). So, if they work more than 38 hours in a week, they may be entitled to overtime.
- Outside the span of ordinary hours of work. The span of ordinary hours of work will usually be specified in the relevant modern award covering your employees.
For example, the Retail Industry Award prescribes the ordinary hours of work as being between 7:00am – 9:00pm on Monday to Friday, 7:00am – 6:00pm on Saturday, and 9:00am – 6:00pm on Sunday.
So, if an employee works outside these hours, they may be entitled to overtime.
In comparison to overtime, time in lieu may offer some benefits, such as:
- Minimising the need to pay overtime rates
- Enabling a greater range of flexible working arrangements and working hours
- Incentivising employees to work increased hours during busy periods by offering a form of leave they can take at a later date
- Strengthening relationships and trust between you and your with employees by being open with them and working together to find solutions
The Model TOIL Term
In 2015, the Fair Work Commission handed down a decision that updated the model TOIL term.
The model TOIL term forms the basis of what obligations, entitlements and safeguards should be inserted into modern awards, including that:
- You and your employee must agree to time in lieu. You’ll need to have separate written agreements each time time in lieu is taken instead of payment for overtime, and retain the agreement for 7 years as an employee record.
- At any time, an employee can request to be paid any accrued but untaken time in lieu, at the applicable overtime rate. If requested, you will need to pay the amount during your next pay cycle.
- Time in lieu must be taken within 6 months of the overtime being worked. If, at the end of the 6-month period, your employee has not taken time off, you will need to pay them at the applicable overtime rate during the next pay cycle.
- Any untaken time in lieu must also be paid to any employee at the applicable overtime rate upon termination.
It is important to note that these model terms only apply to some modern awards, so it is best to check the modern award covering your employees before finalising any time in lieu agreements or workplace policies.
When Can An Employee Ask For Time In Lieu?
As noted above, some modern awards and enterprise agreements set out certain requirements relating to time in lieu arrangements you implement in your business. A list of modern awards containing specific time in lieu provisions can be found here.
Time in lieu arrangements are made by agreement between you and your employees, so it is important to discuss with them whether they will receive overtime pay or time in lieu. This means that, if one of your employees works overtime and asks to take time in lieu of overtime pay, you can say no. Equally, you cannot force an employee to take time in lieu to avoid paying them any applicable overtime or penalty rates.
If your employees are not covered by a modern industry award or registered agreement that provides for time in lieu, then your employee’s entitlement to take time off will come down to whether you have implemented a workplace policy or if it is contained in an employment contract.
What Are Some Problems With TOIL?
While TOIL is often seen as a great solution for employers and employees alike, it can cause some issues.
For example, it may act as a wrong incentive for employees to work overtime when not needed, and normalising a culture of working beyond your hours may threaten a healthy workplace culture.
As such, some employees may take advantage of TOIL, or may be inconsistent with other workplace policies.
These issues can also affect morale within the company or employee confidence in the business’ ability to take care of its employees, especially if there is a pattern of working overtime.
How Do You Calculate Time In Lieu?
As time in lieu offers an alternative to payment of overtime rates, it only applies to the number of hours your employee works beyond their ordinary hours. For example, if your employee is employed on a full-time basis based on 38 hours of work per week, but ends up working 43 hours, they will be entitled to at least 3 hours of TOIL.
Watch out for if any applicable modern award designates the method in which time in lieu should be calculated. There are two main methods of calculating time in lieu:
|Method of calculation||Definition||Example|
|Time for time||The amount of time off is equal to the number of hours worked overtime.||Your employee works 5 hours overtime, so they will be entitled to 5 hours of TOIL|
|Overtime rate||Time off is calculated according to the employee’s overtime rate.||Your employee is entitled to time and a half (150%) for the first two hours of overtime work, and then double-time (200%) for any work performed after that.|
If they work 5 hours overtime, they will be entitled 9 hours of TOIL, comprising:
• 2 hours at 150% = 3 hours• 3 hours at 200% = 6 hours
How Much Time In Lieu Can An Employee Accrue?
As long as any time off is taken within 6 months of being accrued, there is generally no limit on the number of hours of time in lieu an employee can accrue.
You may want to implement your own policies in relation to how time in lieu is managed to avoid any unnecessary burden or strain to your business.
For example, introducing a system that requires employees to have overtime hours approved can help avoid situations in which they stay late to finish their ordinary tasks.
When Can I Ask My Employee To Work Extra Hours?
Generally, you will be able to ask employees to work ‘reasonable additional hours’. They can refuse to work the additional hours if the request is ‘unreasonable’ in the circumstances.
The meaning of ‘reasonable’ depends on a range of factors, including:
- Whether there are any risks to the health and safety of your employee. For example, they may have worked a lot of additional hours recently.
- Your employee’s own personal circumstances. For example, they may have family or carer responsibilities.
- The needs of the business. For example, you may have a big deadline approaching.
- Whether your employee is entitled to overtime payments or penalty rates.
- Whether the additional hours comply with any provisions under any applicable modern award, agreement or employment contract.
- The role of your employee and its respective level of responsibility.
- How much notice you have given to your employee requesting that they work additional hours.
- How much notice your employee has given refusing to work the additional hours.
From navigating modern awards to drafting workplace policies, working out the ins and outs of time in lieu doesn’t need to be hard! Our employment lawyers can help you out.
If you would advice on whether time in lieu is right for your business, you can shoot us an email at email@example.com or give us a call on 1800 730 617 for a free, no-obligations chat.
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