Many of Australia’s Federal Awards include provisions for employers and employees to use time off in lieu (TOIL) arrangements instead of payment of overtime for extra hours worked. This can be a cost-effective arrangement for employers as time in lieu is taken as time for time eg 1 hour worked overtime equals 1 hour time off in lieu, whereas payment at overtime rates commence at a minimum of 150% of the ordinary hourly rate.
However, there are some common pitfalls that can leave employers exposed if the system around TOIL is not managed effectively:
- Confusion over the rules
- Abuse of TOIL
- Overtime becoming the norm
- A build-up of TOIL
- TOIL being applied universally to all roles when no business need (eg people building up TOIL working through lunch breaks and other undefined/not approved times)
If your people are regularly having to work extra hours it should raise alarm bells over whether your teams are adequately staffed, whether there are productivity issues, or efficiency problems requiring further training and support.
Presenteeism and lack of motivation may be reasons why staff are having to work longer to complete tasks, so it is important to look at the underlying causes before reaching for TOIL as a solution. Certain employees might take advantage of TOIL by slowing down productivity and working extra hours in order to get additional time off.
You know you have a problem when staff are taking lunch at their desk and logging it as an hour of research or when employees hanging around in the evening waiting for a lift, book an extra 30 minutes to their TOIL total.
TOIL can also create an environment where working extra hours becomes the norm. Then your business is faced with a never-ending cycle of covering gaps while people take their respective time off in lieu. It can end up in a vicious circle. In this situation, addressing why staff have to continually work extra hours is key.
The biggest problem with TOIL is the accumulation of leave and managing when employees are able to actually take the accrued time off. It wouldn’t be good for business if employees were able to build up TOIL and take a whole month off, for example. It is a balancing act.
Tips on Making TOIL Work Effectively for you
Under Australia’s Federal Award systems, the provisions for time off in lieu arrangements is linked to worked overtime hours. Overtime has to be approved in advance and award requirements also provide that TOIL arrangements are to be agreed in writing. It is important to consult your relevant award to see what provisions apply, as this is a good starting point.
Clarify the details of overtime or TOIL
It’s extremely important to clarify the rules if you are going to operate a system of TOIL.
It’s a good idea to check with individual employees whether they would prefer extra pay or time off in lieu of additional hours worked rather than making any assumptions.
There is no legal right for you as an employer to pay employees for extra hours worked (so long as minimum award requirements are met), but it is good practice to reward your employees when they have gone above and beyond, either through additional benefits or using TOIL. Don’t forget how important a simple ‘thank you’ is. Importantly be clear with your employees on expectations around overtime and how they will be compensated.
Agree TOIL terms in writing
Clarity is essential when you are implementing a time off in lieu policy and making the rules clear in employment contracts is a good idea. Or for individual one-off arrangements, you may prefer to agree the terms and conditions in writing outside of the employment contract. It is also a good idea to set out the minimum amount of time that can be recorded as TOIL.
Create an environment of trust
Good business culture requires trust. TOIL is an issue of trust and in most cases, employees will tend to give a little extra to the business than they actually take back.
Agree times TOIL can be taken
It makes sense to ring-fence when TOIL can be taken to less busy business periods. This is particularly useful for seasonal businesses where there are quieter days or times of year.
Time in lieu agreements work well where employees plan to use time in lieu to accompany any planned annual leave. From a business perspective that helps with planning work and projects and ensuring resourcing.
In addition, the awards outline that TOIL must be taken within 6 months of the time being worked. So long as you have written agreement, it can be taken within a month of time in lieu having been accrued or whatever you agree is a reasonable timeframe. If employees are working on a project and accumulating more time in lieu than usual, you may agree a longer period of time and outline a plan for how this TOIL will be taken. But remember, the Awards provide that if TOIL is not taken within the 6 months from when it was worked, or if the employee wants it to be paid out – the TOIL then has to be paid at overtime rates. The TOIL must also be paid out at overtime rates if there is TOIL outstanding when employment is ending.
Establish a system for recording and approving overtime and TOIL It can sometimes be difficult for managers to keep track of who has worked extra hours and when TOIL is being taken. If you are operating a system of TOIL it makes sense to have a streamlined process to deal with the administration. Manual processes will waste time and money, and mistakes can occur more easily.
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