What Is Time Off in Lieu? (2024 Update)

What Is Time Off in Lieu?

Introduction

There are many jobs where employees may be required to work overtime. For roles that are not paid ‘on the hour’, Time Off in Lieu (TOIL) can be a good way to compensate employees for extra hours they work. Modern awards often include provisions that concern overtime rates or TOIL. There were decisions made by the Fair Work Commission (FWC) in 2015 that made significant changes to those provisions. In light of those changes, this article will give you an overview of TOIL and help you understand what it means for your business. It is important to note that the term TOIL may be used interchangeably with time off or time in lieu.

Table of Contents

What is Time Off In Lieu (TOIL)

Some modern awards include TOIL as a provision whereby the employee agrees to take time off instead of receiving overtime pay. So, for every overtime hour, an employee can take the same amount of hours as TOIL, sometimes referred to as ‘time for time.’ TOIL is also sometimes referred to as ‘flex time’.

When it comes to these TOIL provisions in modern awards, they can be separated into 3 distinct categories:

  1. TOIL calculated at employee’s ordinary rate
  2. TOIL calculated at employee’s overtime rate
  3. Award is silent on TOIL

Therefore, not all awards have TOIL provisions. However, TOIL provisions can also be outlined in a standard employment contract.

Model TOIL Term

The model TOIL term was part of the Commission’s review of modern awards and it requires:

  • The employee and employer agree to TOIL at a mutually-agreed time
  • TOIL will be taken within 6 months of the overtime being worked. If this does not occur, the overtime is paid at overtime rates
  • Separate written agreements for each occasion that TOIL is taken instead of overtime
  • If requested by the employee, the employer must pay the employee for any accrued but untaken TOIL at overtime rates
  • Any untaken TOIL must be paid to the employee on termination at overtime rates

The model TOIL term is only applicable to some of the modern awards. Make sure to consult the relevent award on the FWC site before finalising your employment agreements.

Example

Emily is a business owner and employer of an electronics retail store. She needs one of her employees, Dylan, to work more than the ordinary hours listed in the Retail Award. Emily asks Dylan to work overtime for time off, however, she cannot force Dylan to agree. After considering the offer, Dylan accepts and they both sign a TOIL agreement that states when the overtime hours start and end. As Dylan works under the Retail Award, and he is earning his normal base rate, he earns an hour of time off for every hour he worked overtime. Dylan worked 3 hours overtime so he earned 3 hours of TOIL. Under the award, Dylan must use the TOIL he earned from that shift within 6 months. 

6 Months pass and Dylan did not use the TOIL hours he earned. As a result, Emily pays Dylan the overtime he would have earned if he did not agree to TOIL. Dylan will get paid that amount his next pay cycle.

What terms should the TOIL Agreement include?

The TOIL Agreement should include the following terms:

  • Number of overtime hours worked and when they were worked.
  • Both the employer and employee agree that the employee may take time off instead of being paid overtime.
  • If an employee requests so at a later date, the employer must pay the employee for the overtime hours that have not yet been used as time off instead of the agreed TOIL. The rate of the overtime pay will be the same as when the shift was originally worked.
  • If an employee does request to be paid overtime instead, they must be paid the amount owed their next pay cycle.

TOIL and Termination

When an employee is terminated (either at the direction of the employee or employer), they are to be paid out any time in lieu which has not been taken. For example, if you had an employee who had worked 8 hours of overtime and then resigned, you need to compensate your employee for those 8 hours of overtime worked.

Conclusion

Therefore, as there are different awards that include TOIL provisions, make sure to consult an employment contract review lawyer to receive the best advice. As TOIL provisions are included in a large amount of awards, it is an important aspect of employment agreements.

Most Popular Articles
You may also like
Recent Articles

Get the latest news

By clicking on 'Sign up to our newsletter' you are agreeing to the Lawpath Terms & Conditions

Share:

Register for our free live webinar today!

Managing Casual Employment: A Comprehensive Guide for SMEs

12:00pm AEDT
Tuesday 9th April 2024

By clicking on 'Register for webinar' you are agreeing to the Lawpath Terms & Conditions

You may also like

Thank you!

Your registration is confirmed. Keep an eye on your inbox for an email with details on how to watch the webinar.