Most small businesses have an unwritten understanding with their team: if someone puts in extra hours to hit a deadline or cover a busy period, they'll get that time back. It's a fair arrangement. But without a clear policy and a reliable way to track it, TOIL has a habit of getting messy.
Hours get forgotten. Balances pile up. Someone leaves and wants to be paid for 12 days of TOIL they've been quietly accumulating for two years.
This guide explains how time off in lieu works, what UK law says about it, how to set it up fairly, and how to track it without it becoming an admin headache.
What is TOIL?
Time off in lieu (TOIL) is when an employee works extra hours and, instead of being paid overtime, they receive equivalent time off at a later date.
So if someone works four extra hours across a busy week, they might take a half day the following week. Same value, different form.
TOIL is common in small businesses where overtime pay isn't always practical, and where there's a degree of flexibility on both sides. Done well, it's a genuine benefit. Done loosely, it creates confusion and resentment.
What does UK law say about TOIL?
There is no statutory right to TOIL in the UK. It's a contractual arrangement, meaning it only exists if you've agreed to it with your employees, either in their contract or through a written policy.
What the law does require is that employees are paid at least the National Minimum Wage for all hours worked. So if someone works extra hours and you offer TOIL instead of pay, you need to be confident their effective hourly rate across all hours worked doesn't fall below the minimum wage. For most salaried employees this won't be an issue, but it's worth being aware of.
The Working Time Regulations also apply. Employees can't work more than 48 hours a week on average (unless they've opted out), and they're entitled to minimum rest periods between shifts. TOIL doesn't change those obligations.
Setting up a TOIL policy
If you're going to offer TOIL, it's worth writing down how it works before you need it. A TOIL policy doesn't need to be complicated. It should cover:
What qualifies for TOIL. Not every extra hour automatically earns TOIL. Be clear about whether it applies to all overtime, or only to hours worked beyond a certain threshold, or only when the extra work is agreed in advance by a manager.
The accrual rate. Most businesses offer TOIL on a straight hour-for-hour basis. Some offer enhanced rates for antisocial hours (evenings, weekends), similar to how overtime pay might be calculated. Either is fine, but be consistent.
When TOIL can be taken. You're within your rights to ask employees to give notice before taking TOIL, in the same way you would for annual leave. You can also restrict when TOIL can be taken if certain periods are particularly busy.
How long TOIL can be carried. This is important. Without a cap, balances can grow to unmanageable levels. A common approach is to set a rolling window of three to six months, after which unused TOIL expires. Some businesses pay out unused TOIL at the end of each quarter instead.
What happens to TOIL when someone leaves. If an employee has an outstanding TOIL balance when they leave, you'll generally need to pay it out. Make sure your policy is clear on this, and that you're keeping accurate records so there's no dispute.
How to track TOIL
This is where a lot of small businesses come unstuck. TOIL that's tracked informally, via a note in a diary or a text message, is TOIL that will eventually cause a problem.
The minimum you need is a simple record for each employee showing:
- Hours or days of TOIL accrued
- Hours or days of TOIL taken
- Current balance
A spreadsheet can handle this for a small team, but it requires discipline to keep up to date. The more reliable approach is to track TOIL in the same place you track annual leave and sickness, so everything is in one place and you always know where each person stands. Whatever system you use, the key is keeping TOIL completely separate from annual leave so the two never get muddled, particularly when someone leaves and balances need to be calculated.
Common TOIL problems and how to avoid them
Balances becoming unmanageable. Set a cap and communicate it clearly. If someone has accrued three weeks of TOIL, encourage them to use it before it gets any larger. Uncapped TOIL becomes a liability on your books.
TOIL being taken at inconvenient times. Treat TOIL requests the same as annual leave requests. You can decline or ask someone to reschedule if the timing doesn't work for the business, as long as you're giving them a reasonable opportunity to take it.
No record of what was agreed. If a manager verbally tells someone they can have time back for staying late, that agreement should be recorded somewhere. Without a paper trail, disputes become very difficult to resolve.
TOIL creeping into annual leave. Keep the two completely separate. If someone takes a TOIL day, it should come off their TOIL balance, not their holiday allowance. Mixing the two causes confusion and, if someone leaves, can make it very difficult to work out what you owe them.
A quick summary
TOIL is a straightforward, flexible arrangement that works well for small businesses. The key is treating it formally enough to avoid problems later. Write down how it works, keep a clear record of balances, set a sensible cap, and make sure everyone knows the rules.
If you're managing leave for a small team and tracking TOIL on a spreadsheet alongside everything else, it might be worth looking at a simple tool that keeps it all in one place. Absently does exactly that, for £1 per person per month with a 30-day free trial.