What Is the Meaning of Time in Lieu (TOIL)?

Time in lieu (TOIL) is often treated as a simple concept: an employee works extra hours and takes time off later. However, in practice, it can quickly become a payroll and compliance risk if handled informally.

Many employers make the mistake of relying on verbal agreements or vague understandings, which can lead to disputes or underpayment issues.

TOIL should never be treated as a casual “we’ll make it up later” arrangement. In Australia, it’s regulated by modern awards, enterprise agreements, or employment contracts.

This guide will walk you through when TOIL can be used, how to calculate it, whether employees must agree to it, and what happens if employees don’t take it.

What does time in lieu mean?

Time in lieu in Australia, also known as “time off in lieu” (TOIL), is a workplace arrangement where employees receive time off instead of overtime pay for hours worked beyond their standard schedule. This compensatory leave provides flexibility by balancing extra work hours with equivalent rest periods.

In simple terms, it is an agreement in which you (an employer) agree to give an employee paid time off instead of additional hours worked outside their standard contract hours (overtime), rather than extra pay.

So, for every overtime hour, your employee can take the same number of hours as TIL, TOIL, or ‘time for time.’

Is time in lieu the same as overtime?

Time in lieu is closely linked to overtime, but it’s not the same thing. Overtime refers to the extra hours worked, while TOIL is one way to compensate for those hours.

Here’s a quick table summary of what different relevant terms mean:

For example, if an employee works two hours of overtime, they may either be paid at overtime rates or agree to take TOIL later, depending on the applicable rules and agreements.

When can an employer offer time in lieu?

TOIL isn’t automatically available in every workplace. Its use depends on the relevant industrial instrument.

Many modern awards contain specific clauses that allow TOIL, often with detailed conditions. Enterprise agreements may also include their own rules.

For employees who are not covered by an award or agreement, TOIL may be governed by the employment contract or a workplace policy.

Before offering TOIL, you should always check the applicable instrument. Using TOIL outside these rules can create underpayment risks and potential TOIL Fair Work claims.

Does an employee have to agree to TOIL?

In most cases, TOIL requires genuine agreement between the employer and the employee. It’s not something an employer can impose unilaterally.

Some modern awards go further and require a separate written time in lieu agreement each time overtime is worked. This ensures that the employee understands and accepts the arrangement.

Importantly, you should never pressure an employee into accepting TOIL.

The agreement should clearly record the overtime worked and when the TOIL will be taken. In some cases, employees may also have the right to request payment instead if the TOIL is not used within a specified timeframe.

Does a TOIL agreement need to be in writing?

In many cases, yes.

Modern awards frequently require TOIL agreements to be recorded in writing. Even when this isn’t the case, written records are strongly recommended.

Keeping written records helps demonstrate compliance and reduces the risk of disputes. You can maintain records through emails, payroll systems, or HR platforms, provided they capture the necessary information.

The TOIL Agreement doesn’t have to be overly complicated. Simply make sure you’re covering all the key information, including:

• The employee’s name and the date overtime was worked.
• The number of overtime hours and how TOIL is calculated.
• When the TOIL will be taken.
• Confirmation that the employee agreed.
• Any manager approval required.

Time in lieu record-keeping should be stored alongside payroll records.

How is time in lieu calculated?

Often, you don’t calculate TOIL on a simple hour-for-hour basis. The correct approach depends on the applicable award, agreement, or contract.

In some cases, one hour of overtime results in one hour of TOIL. In others, the TOIL must reflect the applicable overtime rate. This means that if overtime would have been paid at 1.5 times the ordinary rate, the employee may be entitled to 1.5 hours of TOIL for each hour worked.

Employers should not assume a default approach. The relevant instrument will usually specify whether TOIL is calculated as equivalent time off or at overtime rates.

When does time in lieu need to be taken?

Most modern awards set a timeframe within which employees must take TOIL, often within six months.

If the employee doesn’t take TOIL within the required timeframe, the employer may need to pay them for the overtime instead. In some situations, employees can also request payment for accrued TOIL.

Because of this, employers should actively track TOIL balances and ensure that leave is taken or paid out within the required period.

What happens to unused TOIL?

Unused time in lieu is a common source of disputes. The treatment of unused balances depends on the relevant award, agreement, or contract.

More often than not, you’ll need to pay out any unused TOIL. The payment reflects employee overtime rights and entitlements that would have applied if the employee had been paid instead of accruing TOIL in the first place.

Before processing final pay, you should carefully check the applicable rules to ensure compliance with your employer’s TOIL obligations.

Can salaried employees get time in lieu?

Salaried employees aren’t automatically excluded from TOIL. Many are still covered by modern awards or enterprise agreements, even if they receive an annual salary.

If the relevant instrument or contract permits TOIL, you’ll need to follow the rules set out in the agreement. You should continue to track additional hours, particularly for award-covered roles.

Can casual employees get time in lieu?

Casual employees may also access TOIL, but only when their relevant award or agreement allows for it.

Because casual employees receive a casual loading and may have different overtime entitlements, you’ll need to handle TOIL arrangements carefully. As with any other type of employee, informal or undocumented TOIL arrangements for casuals can create compliance risks.

Accurate recordkeeping is especially important in these cases.

What records should employers keep for TOIL?

You need to maintain accurate time and wages records under Fair Work legislation, and TOIL arrangements form part of these obligations.

At a minimum, employers should keep records of:

• Hours worked (both ordinary and overtime)
• TOIL agreements and accruals
• TOIL taken and remaining balances
• The overtime rates that would have applied
• Any employee requests to be paid instead of taking TOIL
• Payroll records and final pay calculations
• Correspondence confirming agreement

You typically need to keep these records for seven years.

What should a time in lieu policy include?

A well-drafted TOIL policy helps ensure consistency and compliance across the organisation. It should explain:

• When TOIL can be used
• Which employees it applies to
• Who has the authority to approve overtime
• How TOIL is calculated, recorded, and taken
• When unused TOIL will be paid out
• How TOIL is handled on termination
• How the policy interacts with awards, enterprise agreements, and employment contracts

Having clear rules in place reduces the risk of misunderstandings and payroll errors.

When should you get legal advice?

TOIL rules can vary significantly depending on the applicable award or agreement, and mistakes can result in underpayment claims or penalties.

Employment lawyers can assist with reviewing TOIL arrangements, drafting compliant policies, and ensuring payroll practices align with Fair Work requirements.

When in doubt, it’s a good idea to consult an employment contract review lawyer to receive the best advice. As always, at Lawpath, we are here to help you.

FAQs

What does time in lieu mean?

Time in lieu means employees receive paid time off given instead of overtime pay for extra hours worked.

Is time in lieu legal in Australia?

Yes, time in lieu is legal in Australia provided it complies with the relevant award, enterprise agreement, or contract.

Can my employer force me to take time in lieu?

Generally no. TOIL usually requires employee agreement.

Is TOIL hour-for-hour?

Not always. It depends on the applicable rules, and in some cases, it must reflect overtime rates.