Time Off in Lieu (TOIL): What It Is, UK Rules, How to Track It and Why US Comp Time Differs (2026 Guide)

Short answer: time off in lieu (TOIL) is paid time off given instead of overtime pay: work a Saturday morning, take a morning off later. In the UK it has no legal definition and no statutory right: it exists only through the contract or a written policy, which should fix the rate (usually hour for hour), a cap on banked hours, a deadline to use them (one to three months is typical) and what happens to the balance when someone leaves. The Working Time Regulations still apply: 48 hours a week on average unless opted out, 11 hours' daily rest, and pay that never drops below the minimum wage. In the United States, comp time is illegal for private-sector hourly staff: overtime must be paid at time and a half.

One in eight UK employees did unpaid overtime last year, an average of 6.8 hours a week, worth £28.5 billion to their employers. Somewhere between "we'll pay you the extra" and "it's just part of the job" sits a third option that most small businesses use informally and few write down: time off in lieu. This guide covers what TOIL is, what UK law does and does not say about it, how it differs from overtime pay, flexitime and holiday, what a policy has to settle, where it works and where it quietly goes wrong, how it is taxed, what the rules look like across the Atlantic, and the simplest way to keep track of it in a small team.

What is time off in lieu?

In lieu means "in place of". Time off in lieu is extra paid leave granted in place of overtime pay: an employee works beyond their contracted hours, and instead of being paid for those hours, they bank them and take them off later. Someone who covers a half-day on Saturday to hit a release date gets a half-day off the following month. Someone who works three late evenings during a stock take takes a Friday off when things are quiet.

TOIL is not a new kind of leave. It is a way of settling overtime, and it lives or dies on three numbers: how many hours were worked over contract, at what rate they convert into time off, and by when they must be used. Everything else in a TOIL policy is there to keep those three numbers honest.

What UK law says: nothing, and the things around it

There is no statutory right to TOIL and no statutory definition of it. There is not even a statutory right to be paid for overtime: GOV.UK states that employers do not have to pay workers for overtime, as long as average pay for the total hours worked does not fall below the National Minimum Wage. Acas lists "time off instead of overtime pay" as one of the arrangements an employer may offer, alongside a higher overtime rate or plain pay, and reminds employers that the written statement of particulars must set out what hours count as overtime and how they are paid. The Employment Rights Act now going through its phased commencement contains nothing on overtime or TOIL, and the "right to switch off" floated during its passage was dropped before the Bill was introduced.

What the law does fix is the frame around TOIL.

• The 48-hour week. Under the Working Time Regulations, working time including overtime must not exceed 48 hours a week on average, normally measured over 17 weeks, unless the worker has signed an opt-out. The opt-out must be in writing, can be cancelled with seven days' notice (up to three months if the agreement says so), and nobody can be dismissed or treated unfairly for refusing to sign one. Under-18s are capped at eight hours a day and 40 a week with no opt-out. Banking hours as TOIL does not take them out of the average.
• Rest. Eleven consecutive hours of rest in every 24, 24 hours off in every seven days (or 48 in every fourteen), and an uninterrupted 20-minute break on any working day over six hours. A late-night deploy followed by a 9 am start breaks the daily rest rule whether or not the hours go into a TOIL bank.
• Minimum wage. For hourly-paid staff, unpaid overtime that is later "repaid" as TOIL still has to leave average pay for the pay reference period at or above the minimum wage. For salaried staff near the threshold, a heavy month of banked hours can quietly push the effective hourly rate below it.
• Records. Employers must keep records showing compliance with the 48-hour limit and the night-work rules for two years; Acas notes there is no duty to log every daily hour, but a TOIL bank is meaningless without one. Records of holiday taken and paid for will also have to be kept for six years under the Employment Rights Act.
• Contract. An employee whose contract promises paid overtime cannot be switched to TOIL unilaterally, and an employee cannot be forced to bank hours they were entitled to be paid for. Acas's general advice, to get agreements in writing, applies with force here: a TOIL scheme that lives in a manager's head is a dispute waiting for a leaver.

TOIL, overtime pay, flexitime and holiday: four different things

The two confusions that cost money are between TOIL and holiday, and between TOIL and overtime pay. TOIL can never replace statutory holiday: the 5.6 weeks are a separate paid entitlement, and a policy that "tops up" holiday with TOIL is simply granting extra contractual leave. And if a business regularly pays out banked hours instead of letting people take them, those payments become overtime pay, which the courts (Bear Scotland on non-guaranteed overtime, Flowers on regular voluntary overtime) and the regulations on "normal remuneration" say must be reflected in holiday pay for the four weeks of EU-derived leave, and in all 5.6 weeks for irregular-hours and part-year workers. Our guide to unused holiday covers what happens to the statutory days themselves.

The numbers: how much overtime goes unpaid

The TUC's annual analysis of the Labour Force Survey, published for Work Your Proper Hours Day in February, found that 3.5 million UK workers, 11.9% of employees, did unpaid overtime last year, averaging 6.8 unpaid hours a week and worth £28.5 billion in total, about £8,100 per worker. The previous edition had put the figure at £31 billion across 3.8 million people, with teaching (38% of the profession) and health and care managers (35%) the most exposed. The Bureau of Labor Statistics equivalent does not exist for unpaid hours, but ADP's global People at Work survey of more than 39,000 workers found 62% doing up to five unpaid hours a week, 26% between six and fifteen, and 12% sixteen or more.

Read against those figures, a TOIL scheme is the cheapest honest answer to unpaid overtime a small employer has. It does not add to the wage bill, it makes the extra hours visible instead of invisible, and it gives them back as rest, which is what the 48-hour week and the rest rules are for.

What a TOIL policy has to settle

Because the law is silent, the policy has to do all the work. The public-sector schemes worth copying converge on the same handful of terms.

1. Who is eligible. Most schemes cover everyone below a senior grade; the NHS Agenda for Change handbook, for example, excludes staff in bands 8 and 9 from overtime payments altogether, and many employers give senior staff TOIL at the manager's discretion instead. Make sure hours-based eligibility rules do not indirectly discriminate against part-time staff.
2. Pre-approval. Overtime that earns TOIL is agreed in advance, in writing or in the tool, by the line manager. "I stayed late" is not a claim; "we agreed I would cover the launch" is.
3. The rate. Plain time, hour for hour, is the norm: the NHS handbook states that time off in lieu of overtime payments is at plain time rates. Some employers give 1.5 hours per hour for weekends or bank holidays. Whatever you choose, write it down, because the rate is the number people remember differently.
4. A cap on banked hours. Twenty to forty hours is the usual range: Perth and Kinross Council caps the bank at 36 hours, Littleport Town Council at 40 hours in a rolling three months. A cap forces conversations before the balance becomes a liability.
5. A deadline. One to three months from the date the hours were worked. The NHS pays TOIL not taken within three months at the overtime rate; the West of England Combined Authority asks for it to be taken within a month unless the manager agrees otherwise. Decide whether expired TOIL is paid out or lost, and say so, because "lost" can look like unpaid overtime to a tribunal.
6. Minimum blocks. Fifteen or thirty minutes for accrual, half days for taking it: a leave planner thinks in half days, not in seven-minute increments.
7. Leavers. State whether the balance is paid out on leaving. If it is, it is earnings: taxed and subject to National Insurance, outside the £30,000 termination exemption, exactly like untaken holiday.
8. A single record. One place where the hours earned, the hours taken and the balance live, visible to the employee and the manager. Not a spreadsheet, not a thread of emails.

Two things a policy cannot do: override the 48-hour average and the rest rules, and take away paid overtime an existing contract already promises. Everything else is yours to design.

Where TOIL works well

• Releases and go-lives. A software deploy at 2 am, a print run, an audit week. The work is real, it is bounded, and what people want afterwards is rest, not a few pounds after tax.
• Seasonal peaks. A retailer in December, an accountancy practice in January, a venue during festival season: TOIL lets a small team absorb a predictable spike and recover in the trough without a permanent hire.
• Personal flexibility. A wedding, a school holiday, a long weekend for a family visit: staff who would rather earn a day off than a day's pay will volunteer for the Saturday shift.
• Salaried staff with no overtime clause. Where the contract says "such hours as are necessary", TOIL is the only visible way to acknowledge a brutal month.

Where it goes wrong

• It hides a staffing problem. If half the team is permanently in TOIL credit, the business is short a person and is borrowing them from the team's evenings. TOIL is a shock absorber, not a headcount plan.
• The year-end pile-up. Uncapped banks with no deadline mature at the same time: December arrives, everyone wants their thirty banked hours plus their remaining holiday, and the calendar has no room. Caps and short expiry windows exist to prevent exactly this.
• Burnout dressed as generosity. Eight late nights "paid back" as one long weekend is not a fair exchange, and the 48-hour average does not care that the hours were banked. Watch the accrual rate per person, not just the balance.
• Unwritten rates. The employee remembers time and a half; the manager remembers plain time; the leaver's solicitor remembers unpaid overtime.

Tax: what TOIL costs the payroll

Nothing, while it is taken. TOIL is ordinary salary continuing during a day off, so there is no extra PAYE or National Insurance, and no entry on the payslip beyond the leave record. Overtime pay, by contrast, is earnings taxed in the normal way. The moment a TOIL balance is paid out, on expiry or on leaving, it becomes earnings too. HMRC has no guidance specific to TOIL; the treatment follows from the ordinary rules on earnings and on payments for untaken leave.

Tracking TOIL simply

The mistake most small businesses make is to over-engineer this: a timesheet system, a reconciliation spreadsheet, a monthly email. The public-sector policies above run on a one-page log. The rule of thumb is that the hours earned live wherever you already record working time (a timesheet, the rota, the payroll note the manager approves), and the time taken lives in the leave planner, next to holiday, sickness and remote days, where the whole team can see it.

In a tool like Bueggio HR you create TOIL as its own leave type: it does not deduct from the holiday allowance, it requires approval, and each person can carry an optional yearly counter for it, so the days granted and the days taken stay visible to the employee and the manager without anyone asking. Employees book a TOIL half-day from their phone with a note ("Saturday launch cover"), the manager approves from email, Slack or Teams, the wall chart shows the absence in its own colour, and Google Calendar or Outlook receive the event. It counts in days and half days, not minutes: it is a leave tracker, not a time clock, which for a team of ten is precisely the point.

And in the United States?

The vocabulary changes ("comp time" or "compensatory time") and so does the law, sharply. Under the Fair Labor Standards Act, non-exempt employees must be paid at least one and a half times their regular rate for every hour over 40 in a workweek, and the Department of Labor is explicit that hours cannot be averaged over two or more weeks. The comp-time exception in section 7(o) of the Act applies only to state and local government employers: at least 1.5 hours of comp time per overtime hour, capped at 240 hours (480 for public safety, emergency response and seasonal work), usable within a reasonable period unless it would unduly disrupt operations, and cashed out on separation at the higher of the final rate or the three-year average. A private employer offering the same deal to hourly staff is committing a wage violation, and no state law can permit it, because federal law sets the floor.

What a private US employer can do is narrower than the British TOIL bank.

• Shift hours within the same workweek. Ten hours on Tuesday and six on Friday is 40 for the week and owes no overtime. In California this needs care: the state pays daily overtime over eight hours and double time over twelve, and the only way round it is makeup time under Labor Code section 513, which requires a signed written request from the employee for each occasion, caps the day at eleven hours and the week at 40, and forbids the employer from soliciting the request. Alaska, Colorado and Nevada also have daily overtime rules.
• Give informal time off to exempt staff. Salaried employees who meet the duties tests and earn at least $684 a week ($35,568 a year, the threshold the Department of Labor formally restored this spring after the higher figure was vacated in court) are not owed overtime, so an employer may reward a heavy month with a day off. Advisers suggest not calling it comp time and not tracking it hour for hour, to avoid implying the person is hourly.
• Watch Congress. The Working Families Flexibility Act, which would let private employers offer 1.5 hours of comp time per overtime hour under a voluntary written agreement, capped at 160 hours and cashed out within 31 days of year end, was reported out of the House committee in February. Earlier versions passed the House and died in the Senate; as of publication this one has not had a floor vote.
• Count the new tax break. The "no tax on overtime" deduction lets workers deduct the premium half of FLSA-required overtime pay, up to $12,500 ($25,000 for joint filers), for four tax years, phasing out above $150,000 of income. It applies to cash overtime only. Time off carries no such break, which makes paid overtime relatively more attractive to US workers than it was, and the case for private comp time weaker.

The average private-sector workweek is 34.4 hours, and manufacturing employees average 3.1 overtime hours a week according to the latest Employment Situation report, so the question is far from academic. For a US team, then: pay non-exempt overtime, keep the week at 40 by planning, and use the leave planner for the day off you give a salaried colleague after a hard stretch.

Managing banked time without losing sight of the team

The operational risk of TOIL in a small business is concentration: the people who earned the most hours during the peak are the ones who want them back in the same fortnight, usually next to a bank holiday. A shared wall chart that shows TOIL in its own colour beside holiday, sickness and remote days makes the clash visible before it is approved, a cap on simultaneous absences per department enforces the "one at a time" rule automatically, and a date lock on the next peak stops banked hours from being spent in the week you need everyone. Our guides to leave management software and tracking time off cover the criteria; for the hours side, the guides on monthly working hours and full-time hours and the working hours calculator give you the baseline the overtime is measured against. Bueggio HR costs €1.30 per user per month, with the first month free, no card required.

Frequently asked questions

Is time off in lieu a legal right in the UK?

No. UK law says nothing about TOIL: there is no statutory right to it, no statutory rate for overtime and no rule on how banked hours must be used. TOIL exists only where the contract, a written policy or an individual agreement creates it. What the law does fix are the limits around it: a 48-hour average working week under the Working Time Regulations unless the worker has opted out in writing, an 11-hour daily rest, a 24-hour weekly rest, a 20-minute break on shifts over six hours, and average pay that never falls below the National Minimum Wage for the hours actually worked.

Can an employer give TOIL instead of overtime pay?

Yes, if the employee agrees. The written statement of employment particulars must say what counts as overtime and how it is compensated, so an employer who wants to offer time off instead of money should write that into the contract or into a TOIL policy the employee has accepted. TOIL cannot be imposed on someone whose contract promises paid overtime, and it cannot count towards the 5.6 weeks of statutory holiday, which remain a separate, paid entitlement. If TOIL is regularly converted into overtime pay instead, that pay may have to be reflected in holiday pay.

Is comp time legal in the United States?

For private employers, no. The Fair Labor Standards Act requires non-exempt employees to be paid one and a half times their regular rate for every hour over 40 in a workweek, and the comp-time exception in section 7(o) applies only to state and local government agencies, at a rate of 1.5 hours per overtime hour with a 240-hour cap (480 for public safety, emergency and seasonal work). A private employer can only shift hours within the same workweek, or offer informal time off to exempt salaried staff, who are not owed overtime in the first place. A bill to allow private-sector comp time was reported out of committee in the House earlier this year but has not become law.

Methodology and sources

UK legal framework: GOV.UK on overtime rights, maximum weekly working hours and the opt-out, rest breaks and holiday entitlement; Acas on overtime, working time rules and its Employment Rights Act timeline; the Employment Rights (Amendment, Revocation and Transitional Provision) Regulations on normal remuneration and rolled-up holiday pay (legislation.gov.uk); Bear Scotland v Fulton and East of England Ambulance Service v Flowers. Policies: NHS Terms and Conditions Handbook, section 3; TOIL policies published by Perth and Kinross Council, Littleport Town Council, Luton Council and the West of England Combined Authority. Statistics: TUC Work Your Proper Hours Day analysis of the Labour Force Survey (current and previous editions), ADP People at Work. United States: 29 U.S.C. §207, Department of Labor Fact Sheet #23 and Fact Sheet #7, the Working Families Flexibility Act as reported, the IRS page on the no tax on overtime deduction, California DIR overtime FAQ and Labor Code §513, the Department of Labor final rule restoring the exemption thresholds, and the BLS Employment Situation. Employment law on both sides of the Atlantic is moving: check the current text and your contracts before relying on any figure. This article is not legal advice.