2 min read

Calculating time off in lieu

Sorry to alert you, but there are less than two months until Christmas Day (or is it fewer than two months?) Either way, the ‘silly season’ will soon be upon us and some businesses will be experiencing pre-Christmas panic and requiring their employees to work additional hours to fulfill orders, meet targets, or just go that ‘extra mile’ to deliver great customer service.

So what happens when your budget doesn’t stretch for additional overtime payments to staff or employees would rather take advantage of the sunshine and take time off in lieu of payment to spend with their kids on school holidays? Can everyone have their cake and eat it, too?

Time off in lieu (TOIL) arrangements allow an employee to take time off from work in lieu of overtime payment. The following short article by Nicole Hebblewhite will help explain the basics of TOIL so that the process can be embraced, not feared, and everyone is a winner.

TOIL – getting the calculations right

Currently, 83 of 122 modern awards allow for an employee and employer to make a TOIL agreement. Of those 83 awards, 59 provide that TOIL is calculated at the ordinary rate (i.e. ‘time for time’), while 24 provide that time off for the purpose of TOIL is calculated at the employee’s overtime rate (i.e. ‘time for penalty).

As part of the four-yearly review of modern awards, the Full Bench of the Fair Work Commission has recently finalised a model TOIL term to be inserted into particular modern awards ([2015] FWCFB 6847 (6 October 2015)). The term will vary 113 modern awards which provide for employees to be paid overtime.

The term will facilitate employees reaching an agreement with their employer to take TOIL instead of payment for overtime. The clause requires that:

  • the employee and employer agree to take TOIL at a mutually-agreed time;
  • TOIL will be taken within six weeks of the overtime being worked. If this does not occur, the overtime is to be paid to the employee at overtime rates;
  • a separate written agreement is made for each occasion that overtime is to be taken as TOIL;
  • any accrued, but untaken, TOIL must be paid to the employee on termination at overtime rates; and
  • if requested by the employee, the employer must pay the employee for any accrued but untaken TOIL entitlement at overtime rates.
  • The term offers a financial incentive to employers to enter into a TOIL agreement as TOIL is calculated at the ordinary time rate. That is, an employee will receive an hour of TOIL for each hour of overtime worked, rather than at the relevant overtime penalty rate. Any award that currently allows TOIL to be calculated using the time for penalty method will remain unchanged.

Non-award covered employees

While the National Employment Standards in the Fair Work Act 2009 (Cth) (Act) do not provide for compensation, whether monetary or otherwise, for employees who work overtime, both award-covered and award-free employees could reach a TOIL agreement with their employer by requesting a change in working arrangements under section 65 of the Act. An employer can only refuse this request on reasonable business grounds.

An employment contract or enterprise bargaining agreement may also facilitate the making of a TOIL agreement between an employee and their employer.

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