Are you an Australian business owner? If so, you might be familiar with Time Off in Lieu (TOIL).
Some Modern Awards include provisions which allow employees to take time off instead of receiving overtime pay. This entitlement can be provided for at what is referred to as a “time for time” arrangement or a “penalty” arrangement, involving penalty rates.
A time for time arrangement allows an employee to take the same amount of TOIL hours for every hour of overtime worked. A penalty arrangement however requires that the time off be equivalent to the overtime that would have been paid.
This article will take a closer look at the TOIL provisions and how you can make sure you’re covering your bases.
Ready to learn more? Let’s get started.
Understanding Time in Lieu
Where Modern Awards contain TOIL provisions, there are conditions on how TOIL can be agreed and taken, and it can be difficult to understand these specifics. Here are some details to know about Time in Lieu.
How Does Time in Lieu Work in Australia?
The concept of TOIL requires an employee to work beyond their predetermined schedule, such that overtime is applicable. In certain circumstances, an employer may elect to allow the employee to take time off instead of an immediate monetary payment for the extra hours worked.
In most cases, Modern Awards designate TOIL arrangements in one of three ways:
- Employers calculate TOIL at the employee’s standard work rate.
- Employers calculate TOIL at the employee’s overtime work rate.
- The Award does not include any specific provisions to regulate TOIL arrangements.
In the first scenario, employers simply exchange hour-for-hour, granting employees one hour of paid time off for every hour of overtime they work.
In the second scenario, employers calculate TOIL hours based on the employee’s overtime rate, for example granting time and a half for the first two hours, and then double-time for any hours beyond that.
In the third example TOIL may or may not be suitable and requires an assessment of the business and Award specific requirements. If your Award does not provide for TOIL it is recommended that you seek further advice.
Time Off in Lieu of Overtime
Subject to mutual agreement between employee and employer, your employees may be able to take TOIL in exchange for overtime payments, and in some cases, annual leave loading may also apply.
There is some consistency between Modern Award TOIL provisions, however each Award may have unique requirements. Common provisions include:
- TOIL can only be taken when genuinely agreed
- Each time overtime is worked a separate agreement to take TOIL must be made and it must be recorded in writing
- How time off is calculated (e.g. time for time or penalty)
- The time off must be taken within six months after the overtime is worked, or at a time agreeable to both the employer and employee
- The employee may end the agreement and request to be paid overtime instead of taking time off, in which case the employer must pay the overtime in the next pay period
What should each agreement include?
First, it must be in writing, though email is permissible. Additionally, there will need to be a new agreement for each time overtime is worked. The specific content to cover includes:
- The employee’s total number of applicable overtime hours
- The time period when those overtime hours were worked
- A statement affirming that both parties have agreed to the employee taking time off instead of overtime payment
- A statement affirming that if a request is made, the employer must pay the employee (in the next pay period) for overtime hours worked at the paid overtime rate
Time Off In Lieu On Termination
If an employee has Time Off in Lieu of Payment accrued at the time of their termination, how are those hours paid out? Should an employer treat it like annual leave or does TOIL get paid out differently?
When an employment relationship ends, the Fair Work Act and Modern Awards require that employees receive certain entitlements in their final pay. Included in these is the balance of any accrued but untaken TOIL that the employee has earned. How TOIL is paid on termination depends on the relevant industrial instrument and contract of employment.
Payment In Lieu Of Notice
Now that we’ve covered TOIL, what is Payment in Lieu of Notice?
Payment in lieu of notice is a payment made to employees by an employer for a notice periodthat they have been told by the employer that they do not have to work.
Payment in lieu of notice can be made in circumstances whereby an employer terminates an employee or, alternatively, when an employee resigns.
Understanding your obligations
Keeping up the changing regulations, staff management, and leave entitlement can be tricky for business owners. Peninsula has worked with thousands of businesses, supporting them with HR and WHS advice and resources. Our team offers tailored advice and helps you understand your obligations as a business owner. Want to know about TOIL in your business? Contact to get all your questions answered.