TOIL vs overtime pay: a practical guide for UK employers

Someone stayed two hours after close to cover a rush. Do you pay overtime, or give time off in lieu (TOIL)? Both are legitimate — the problems come from deciding case-by-case, tracking on scraps, and telling people the rules after the hours are worked.

The two options in one minute

Overtime pay — extra hours are paid, at plain rate or a premium your contract sets. Clean, immediate, and a real cost line.

TOIL — extra hours are banked as paid time off to take later. Cash-neutral in the moment and often preferred by staff who value time — but it creates a liability (owed hours) that must be recorded and eventually honoured.

What UK law actually requires

Neither option is mandated; the law constrains how you run them:

• National Minimum Wage applies to average pay across hours actually worked. Unpaid extra hours with vague future TOIL can drag average pay below NMW — a genuine legal exposure.
• Working Time Regulations still cap the working week (48-hour average, unless opted out) and require rest breaks and rest periods. TOIL doesn't reset those; the hours were still worked that week.
• Contract governs. If the contract says overtime is paid, TOIL can't be imposed instead. If you want TOIL as the default, put it in the contract or a written, agreed policy.

Choosing a default

A sensible pattern for shift businesses:

• Planned, rota'd extra hours → pay them. They were labour you needed; budget them like labour.
• Ad-hoc overruns (stayed late, covered a gap) → TOIL by default, at a clear accrual rate, with pay as the fallback where balances can't realistically be used.
• Never let it be a surprise. People should know before working the hours which treatment applies.

A TOIL policy that won't bite you later

Write down, in one page:

1. Accrual rate — hour-for-hour is common; premium accrual (1.5×) for unsociable hours if you choose.
2. Approval — extra hours count for TOIL only when a manager approved them (before or at the time). No silent accrual.
3. Use-by window — e.g. take TOIL within 8 weeks, booked like any leave.
4. Caps — a maximum bankable balance (say, two shifts' worth) so nobody is owed a week.
5. Leavers — untaken TOIL is paid out at plain rate in the final pay.

Tracking is the whole game

Every TOIL dispute is really a records dispute. The balance must be visible to both sides, updated when earned and when spent, and impossible to lose in a notebook. That means: earned TOIL recorded against the actual worked hours, spent TOIL booked and approved like annual leave, and the running balance on the employee's own screen.

This is exactly the kind of bookkeeping software should do. TeamZap records TOIL alongside leave balances and working-time checks, so the hours, the balance and the booked time off all live in one place — visible to the employee and the manager alike.

This article is general guidance, not legal advice — for specific situations, take advice from an employment-law professional.