Why offer time off in lieu?

Time is the new currency, as folks say. There’s no better proof than the concept of time off in lieu or TOIL. Instead of paying overtime, employers offer extra time off. 

There are many considerations when implementing a TOIL policy. In this guide, we’ll go over the benefits, legal requirements, and best practices for implementing time off in lieu. Find out if it’s a good option for your people and workplace. 

Benefits of time off in lieu 

Offering time off in lieu brings a range of advantages for both employers and employees. Here are six key benefits: 

1. Helps manage costs 

TOIL helps employers manage payroll costs, especially during busy periods. Instead of paying overtime at a higher hourly rate (usually 1.5 times the regular rate), employers can offer time off in lieu. This approach can be particularly helpful for small businesses or organizations with tight budgets.   

Having a time off in lieu policy is part of a competitive employee compensation strategy. It offers flexibility while softening the financial impact of overtime pay. 

2. Improves work-life balance 

Extra time off allows employees to rest after working overtime hours. This supports a healthier work-life balance and helps prevent burnout, especially during longer periods of increased workload.  

A report cites stress as a major factor in workplace accidents and illnesses. This highlights the need to rest and recover even more. 

3. Helps with employee morale 

Employees who receive time off in lieu often feel more valued and appreciated.  

The flexibility to take time off work results in satisfaction at work. According to a 2021 study, taking time off led to lower stress levels and higher levels of job satisfaction.  

4. Attracts and retains talent 

Flexible compensation strategies such as TOIL make organizations more attractive to current and prospective employees. In a competitive job market, offering time off in lieu can help employers stand out and retain top talent, particularly among workers who value flexibility and work-life balance. 

5. Supports business continuity 

TOIL allows employers to manage staffing needs during peak times while managing overtime costs. By offering time off during quieter periods, businesses can maintain productivity and good staffing levels throughout the working week. 

6. Promotes fairness 

A well-designed and transparent TOIL policy ensures that employees are compensated for extra hours worked. This promotes fairness and openness, reducing the risk of resentment or disengagement among staff who work overtime. 

Now that we’ve seen the benefits, let’s look at what goes behind every TOIL policy. 

How TOIL works 

Understanding the mechanics of time off in lieu results in a successful implementation at your workplace. Here are some important elements in the TOIL framework: 

Accrual rate 

Under the Canada Labour Code, TOIL is earned at a rate of 1.5 hours for each hour of overtime. This means that if an employee works two hours of overtime, they are entitled to three hours of time off in lieu.  

Rules vary across provinces and territories – we'll look at these employment standards in a later section.  

Written agreement 

A written agreement between the employer and employee is required to formalize the TOIL arrangement. This agreement should specify: 

• the accrual rate 
• the process for requesting and approving TOIL 
• any limits or expiry rules 

For unionized workplaces, collective agreements may contain specific TOIL provisions. An example is the Toronto Transit Commission’s collective agreement, which states that overtime can be taken as TOIL for up to 120 hours.  

You’ll find other examples of collective agreements in our labour relations section, which you can access with a CHRR+ subscription.  

Ability to opt out 

Time off in lieu is an option for employees, not a blanket policy. It does not replace overtime pay. This is why keeping records of signed agreements is so important in keeping track of which employees prefer TOIL vs. overtime pay. 

Time frame for taking TOIL 

Employees should take their accrued TOIL within a set period, usually three months. A longer period is allowed depending on any agreements made with the employer.  

Having clear limits on TOIL usage prevents excessive banked hours. This also ensures that time off is taken in a structured, organized manner. 

Record-keeping 

Accurate record-keeping is essential. Aside from logging which employees prefer TOIL, employers must track overtime hours worked, TOIL earned, and time off taken.  

Approval process 

All overtime and TOIL should be approved by a manager or supervisor. This helps control costs and prevents unauthorized overtime. 

Is time off in lieu legal in Canada? 

Time off in lieu is legal in Canada if it meets specific requirements set by federal and provincial guidelines. Employers must ensure that time off in lieu is: 

• earned at the correct rate 
• formalized in a written agreement 
• taken within the agreed time frame  

Here are some guidelines under the Canada Labour Code and employment standards for each province or territory. Where a collective agreement exists, TOIL guidelines under that agreement are to be followed: 

Federally regulated workplaces 

Under the Canada Labour Code, time off in lieu is allowed under these conditions: 

• employee is given 1.5 hours' time off for every hour of overtime worked 
• there must be an agreement between the employee and employer  
• time off must be taken within three months 

If the employee leaves the organization before taking TOIL, the employer should pay overtime within 30 days of the employee’s last day. 

Alberta 

Alberta’s employment standards rules refer to banked overtime, given at a ratio of at least 1:1 for every hour of overtime worked. This should be in writing between the employer and employee.  

Employees should take banked overtime within six months of earning it. If employment is terminated before TOIL is used, the employer should pay the employee at a rate of 1.5 hours for each hour worked overtime.  

Alberta has detailed guidelines on this topic, so visit their page on overtime hours. 

British Columbia 

Under section 42.1 of BC’s employment standards, an employer can set up a time bank upon the written request of an employee. This is where overtime wages can be credited, then paid to the employee or converted into paid time off.  

Manitoba 

Manitoba’s labour standards allow for banked time based on an agreement between employees and their employer. For every hour of overtime, employees earn 1.5 hours.  

Banked time must be taken within three months; otherwise, employers should pay out all banked hours. Refer to Manitoba’s overtime guidelines for more details. 

New Brunswick 

There is no mention of time off in lieu or banked time in NB’s employment standards act.  

Newfoundland and Labrador 

Time off in lieu – 1.5 hours for every hour of overtime worked – is allowed under these conditions: 

• both employer and employee agree for TOIL to be taken 
• time off is taken within three months (a maximum of 12 months if the employer agrees) 

Refer to section 25 of NL’s Labour Standards Act for more. 

Northwest Territories 

Section 12 of NT’s employment standards guidelines allows for an overtime agreement between employer and employee. It should state:  

• how much TOIL an employee is entitled to (1.5 hours for every hour of overtime worked) 
• when it should be taken (within three months) 
• what happens if TOIL isn’t taken (employer arranges for overtime to be paid) 

Employees who agree to this setup will get a copy of the overtime agreement.  

Nova Scotia 

There are no provisions for TOIL under Nova Scotia’s Labour Standards Code.  

Nunavut 

Employers must pay employees 1.5 hours for every hour of overtime worked. There are no provisions for time off in lieu.  

Ontario 

The Employment Standards Act has a subsection called “time off in lieu” under Part VIII on overtime pay. It allows for 1.5 hours of paid time off for every hour of overtime worked. This must be taken within three months, 12 months if the employer agrees. 

Prince Edward Island 

PEI’s employment standards also allow for TOIL, but the employee must request it in writing. Time off must be taken within three months of having earned it.  

Time of in lieu is at 1.5 hours for every hour of overtime worked.  

Quebec 

An employer can give paid time off instead of overtime pay if the employee asks for it, or if a collective agreement allows it. Paid time off is at 1.5 hours for every hour of overtime worked. 

The employee must take this time off within 12 months, at a time agreed upon with the employer. If the time off isn’t taken within 12 months, the employer must pay the overtime instead. 

Saskatchewan 

Overtime banks are covered at length in Saskatchewan’s employment standards guidelines. These state that: 

• employees must have a written request to set up an overtime bank 
• employees and employers must have a written agreement in place 
• this agreement is kept by the employer; a copy goes to each employee with an overtime bank  
• employees get time and a half for every hour worked overtime 
• banked time must be taken within 12 months of earning it 

Saskatchewan has great resources on this topic. They have a template for an overtime bank agreement and a recorded webinar on setting up time banks.  

Yukon 

An employee and employer can agree in writing to paid time off instead of overtime pay. Overtime hours must be credited at the correct overtime rate and paid out within 12 months.  

If not used, the time must be paid out at the end of the agreement or within a year. Changing or ending the agreement requires one month’s notice.  

Employment or labour standards are minimum thresholds set by local governments. Your organization can offer enhanced benefits for time off in lieu or overtime pay. 

For more resources and tools, visit our Workplace Compliance Centre. 

Best practices for implementing TOIL policies 

A successful time off in lieu policy requires careful planning, clear communication, and ongoing review. Here are best practices for you to keep in mind: 

1. Develop a clear policy 

Create a written TOIL policy that details: 

• accrual rates (e.g., 1.5 hours for each overtime hour worked) 
• eligibility criteria (who can earn TOIL) 
• procedures for requesting and approving time off in lieu 
• accrual limits and expiry rules 
• restrictions during busy periods 
• relationship to annual leave and vacation time 

It bears repeating that TOIL is an option to (not a replacement of) overtime pay. If you would like more of your workforce to sign up for TOIL, outline the benefits in your policy.  

2. Offer flexibility 

Allow employees to choose between paid overtime and TOIL. You’ll see that these preferences will vary across your workforce.  

A recent study shows, for example, that employees in the 18 to 25 age bracket consider paid leave as very important, more so than their 50-something colleagues. Having time off in lieu would be attractive to your Gen Z employees. 

Offering choices is a way of recognizing what’s important to your people. This respects individual preferences and supports a positive workplace culture. 

3. Keep accurate records 

Some employees may take TOIL, some might prefer overtime pay; keeping accurate records is therefore critical.  

When managing time off in lieu, use digital time-tracking systems to monitor overtime hours and TOIL usage. Go over our list of the best HR software for some options for time tracking and TOIL management. 

4. Communicate the policy clearly 

Inform all employees about the TOIL policy and how it works. Provide written materials, hold training sessions, and make sure employees know how to request and use TOIL. 

Make the policy visible in as many places as possible: 

• employee handbooks 
• company intranet 
• HRIS portal 
• pinned on Slack, Teams channels 

The goal is to increase awareness for TOIL among employees using different touchpoints.  

5. Review and update the policy 

Review the TOIL policy every year to keep it effective and compliant with changes in labour laws. Gather feedback from employees and managers to identify areas for improvement. 

Time off in lieu = time to rest and recharge 

Time off in lieu is a valuable tool for Canadian employers and HR professionals seeking to manage overtime hours, support employee well-being, and maintain business flexibility. By understanding the benefits, legal requirements, and best practices for TOIL, you can design effective policies that work for your people. 

The key takeaway: time off in lieu is an option to overtime pay. Employees have different needs and preferences, so it’s important to offer options that respect and honour those differences. Above all, time off in lieu gives employees the chance to rest and recharge – something every workplace should value. 

Bookmark our section on compensation and benefits for more articles on pay, incentives, and what matters most to your employees