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What is TOIL and How Does it Work?

What is TOIL and How Does it Work?​

Time off in Lieu which is commonly referred to as ‘TOIL’ is an employee entitlement to take time off from work in substitute for being paid overtime for any additional hours an employee has worked outside of their ordinary hours of work.

Employers may consider utilising TOIL as a means of managing employee expenses and providing flexible working hours to their employees.

In 2015, the Full Bench of the Fair Work Commission laid out the ‘Model TOIL Term’ found in the relevant Modern Awards which stipulates the requirements of utilising a TOIL arrangement.

The Model TOIL Term requires:

  1. An agreement between the employee and employer for the employee to receive TOIL in replacement of overtime payments;
  2. A further written agreement between the employer and employee each time an employee takes TOIL in substitute of overtime payments which:
    • States when the employee started and ceased working the overtime hours;
    • States that the employer and employee agree to the employee taking TOIL instead of receiving overtime payments;
    • Provides the following note – ‘if requested by the employee at any time, the employer must pay the employee for any accrued entitlement to take time off in lie of payment for overtime which the employee has not yet used. Payment must be made at the over time rate applying to the overtime worked and must be made in the next pay period following the request.’
  1. That overtime taken as TOIL shall be paid at the ordinary time rate for each over time hour worked;
  2. The time taken as TOIL must be taken within 6 months of the overtime being worked. Otherwise, payment for the overtime must be made to the employee at overtime rates in the next pay period after that 6 month period;
  3. That at any time, the employee may request the employer pay any accrued and unused TOIL entitlements as overtime. Payment must be made by the employer at the over time rate and be paid in the next pay period following the request for payment; and
  4. If the employee’s employment is terminated, the employer must pay out the accrued  and unused TOIL entitlements as overtime payments.

Pursuant to section 65 of the Fair Work Act 2009 which deals with employee requests for flexible working arrangements, the employee may also request TOIL instead of overtime payments. The employer may refuse this request on ‘reasonable business grounds’.

Employers must also identify the method in which TOIL will be calculated which will be stipulated in the relevant Modern Award covering the employee. There are 2 common calculation methods:

  • Time for time method – 5 hours of overtime will equal 5 hours of TOIL; and
  • The overtime rate – 5 hours of overtime at  the overtime rate of 150% will accumulate to 7.5 hours of TOIL.

Although TOIL can provide its benefits to the workplace for both the employer and employee, employers must exercise caution to ensure they satisfy the requirements of a TOIL arrangement. A failure to do so may mean the employer has contravened a Modern Award which under section 45 of the FW Act will expose the business to civil penalties (up to $93,900.00 for a corporation and 18,780.00 for an individual).

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