A time off in lieu (TOIL) policy template is a structured framework that defines how employees can earn and use extra time off instead of overtime pay — covering accrual rates, approval processes, expiry rules, and payroll treatment. TOIL is a popular alternative to overtime pay because it gives employees flexibility while keeping payroll costs predictable. Without a clear policy, however, TOIL becomes a source of disputes: employees claim hours they were never approved for, managers disagree about what was agreed, and accrued TOIL sits on the books indefinitely.
This guide provides a section-by-section template that covers every aspect of TOIL management and includes a downloadable compliance checklist.
Key takeaways
- A complete TOIL policy defines eligibility, accrual rates, approval requirements, expiry rules, usage priority, and payroll treatment.
- TOIL is not a universal right — it must be agreed in advance or retrospectively approved, and it replaces overtime pay rather than supplementing it.
- Accrual rates should be explicit: 1:1 (one hour off per hour of overtime) is standard, but some organisations offer enhanced rates (1.5:1) for unsociable hours.
- TOIL should have a clear expiry date — unbounded TOIL creates a growing liability on the balance sheet.
- The policy must address what happens to unused TOIL on termination.
Section 1: Purpose and scope
Template language:
This policy sets out [Company Name]’s framework for time off in lieu (TOIL). TOIL allows employees who work approved overtime to take equivalent time off at a later date instead of receiving overtime pay. The policy applies to all non-exempt employees eligible for overtime.
Section 2: Eligibility
Template language:
TOIL is available to:
- Non-exempt employees who have worked approved overtime
- Employees whose overtime was pre-approved or retrospectively approved by their line manager
TOIL is not available for:
- Exempt employees (who are not eligible for overtime)
- Overtime that was not approved
- Time worked voluntarily beyond contracted hours without manager agreement
Section 3: Accrual rates
Template language:
TOIL accrues as follows:
- Weekday overtime: [1:1] (one hour of TOIL per hour of overtime)
- Weekend overtime: [1:1] / [1.5:1]
- Public holiday overtime: [1.5:1] / [2:1]
- Night shift overtime: [1.5:1]
TOIL is accrued at the point the overtime is worked, subject to approval. Only approved overtime generates TOIL entitlement.
Section 4: Approval process
Template language:
Overtime must be approved before it is worked, except in genuine emergencies. The TOIL arrangement is agreed at the same time as the overtime approval:
- Employee requests overtime and specifies whether they prefer overtime pay or TOIL
- Manager approves overtime and confirms the TOIL/p pay choice
- The approved hours are logged in [HR system / time tracking tool]
- The employee accrues TOIL at the applicable rate
Once the pay/TOIL choice is confirmed, it cannot be changed. Employees may not retrospectively switch from pay to TOIL.
Section 5: Using TOIL
Template language:
TOIL is taken as annual leave and must be:
- Booked in advance through the normal leave request process
- Approved by the line manager
- Taken within [3/6/12] months of accrual
TOIL days take priority over annual leave for scheduling purposes where the TOIL is approaching its expiry date. TOIL cannot be used to extend a notice period or taken during a period of suspension.
Section 6: Expiry and carryover
Template language:
Accrued TOIL expires [3/6/12] months after the date it was earned. TOIL that has not been taken by the expiry date is paid out at the employee’s normal hourly rate.
The expiry date is tracked in [HR system]. HR will notify employees [30] days before TOIL expiry.
Key decision: Unbounded TOIL creates a growing financial liability. Setting a clear expiry date (3-6 months is common) ensures TOIL is used regularly rather than accumulated indefinitely.
Section 7: TOIL on termination
Template language:
On termination of employment, any accrued but unused TOIL is paid out in the employee’s final pay at their normal hourly rate. TOIL is treated as earned wages for the purposes of final pay calculations.
Section 8: Record-keeping
Template language:
HR maintains records of:
- TOIL accrued (date, hours, rate, approval)
- TOIL taken (date, hours, balance)
- TOIL expiry dates
- TOIL paid out on termination
Employees can view their current TOIL balance at any time via [HR system]. Records are retained for [6] years.
Section 9: Compliance
Template language:
TOIL arrangements must comply with working time regulations. The use of TOIL must not result in:
- Average weekly working hours exceeding [48] hours over the reference period
- Failure to provide minimum rest breaks
- Reduction of annual leave below statutory minimums
Managers must ensure TOIL usage is spread across the year and does not cluster in ways that create operational gaps.
Downloadable TOIL policy checklist
- Purpose and scope defined
- Eligibility criteria specified
- Accrual rates set for each overtime category
- Approval process documented (pre-approval required)
- Usage rules and booking process defined
- Expiry period established with clear timeline
- Pay-out on expiry and termination clarified
- Record-keeping responsibilities assigned
- Compliance with working time regulations addressed
- Policy owner and review cadence established
Leave Balance tracks TOIL accrual and expiry automatically — alerting employees before their TOIL expires and ensuring managers never approve leave that would breach working time rules.
Frequently asked questions
What is the difference between TOIL and annual leave?
TOIL is time off earned through working approved overtime. Annual leave is the standard paid holiday entitlement. They are tracked separately and have different accrual and expiry rules. TOIL cannot replace or reduce statutory annual leave entitlement.
Is TOIL mandatory or optional?
TOIL is optional for the employee — they choose between overtime pay and TOIL at the time the overtime is approved. The employer cannot force an employee to take TOIL instead of overtime pay unless the employment contract specifies this, and even then, it must comply with local law.
Can TOIL expire?
Yes. Most TOIL policies set an expiry date of 3-6 months. If TOIL expires unused, it should be paid out at the employee’s normal rate. Unbounded TOIL creates financial liability and operational risk.
What happens to TOIL when an employee leaves?
Accrued but unused TOIL is paid out in the final pay. This is treated as earned wages, not a discretionary payment. Employers who fail to pay out TOIL on termination may face wage claims.
Can TOIL be used during notice periods?
Some policies prohibit TOIL usage during notice periods to avoid complications with the termination date. This should be stated explicitly in the policy. Where TOIL is allowed during notice, the notice period is extended by the number of TOIL days taken.
This article is general information, not legal advice. Consult qualified employment counsel for jurisdiction-specific guidance.