Day In Lieu In The UK: TOIL, Bank Holidays And Overtime

Running a small business often means covering busy periods, late finishes or work on weekends and bank holidays. Offering a “day in lieu” (sometimes typed as “lieu day”, “day in loo”, “day in lou” or even “lui day”) can be a fair, flexible way to reward staff for additional time worked – but only if you set clear rules and stay compliant.

In this guide, we’ll break down what a day in lieu means under UK law, when to use it instead of paid overtime, how to calculate it for full-time and part-time staff, and the policy wording you should have in place. We’ll also flag the key risks so you can avoid disputes, underpayments and breaches of the Working Time Regulations.

What Does “Day In Lieu” Mean For Employers?

A “day in lieu” (often called TOIL – Time Off In Lieu) is paid time off granted to an employee who has worked additional hours beyond their normal schedule. Instead of (or as well as) paying overtime, you allow the employee to take equivalent paid time off at a later date.

There’s no standalone statute that forces you to offer days in lieu. Whether TOIL is available, how it’s earned, and when it can be taken are contractual matters – usually set in the Employment Contract and/or a policy in your Staff Handbook. However, your approach still needs to respect core employment laws, including:

• Working Time Regulations 1998 – limits on weekly working hours (unless validly opted-out), minimum daily/weekly rest and paid annual leave entitlements. See our overview of the Working Time Regulations.
• Employment Rights Act 1996 – governs pay, deductions, and contractual terms.
• Equality Act 2010 – ensures your policy doesn’t indirectly discriminate (e.g. against part-time staff or those with childcare or religious commitments).

Because TOIL is a contractual construct, the most important thing is clarity. If you choose to offer days in lieu, spell out exactly when they accrue, how they’re calculated and when they must be taken.

When Can You Offer Or Require A Lieu Day?

As an employer, you can agree to TOIL where it suits your business model – for example, to smooth staffing costs during seasonal peaks, or where the team sometimes needs to attend evening events, perform month-end closes, or cover weekends.

Typically, TOIL is granted where:

• Work is done outside normal hours at the employer’s request (not purely at the employee’s discretion).
• Additional hours are pre-approved by a manager, not assumed after the fact.
• It’s operationally practical to give time off later (rather than pay overtime now).

Be careful with any suggestion that you can “require” an employee to take TOIL instead of pay without a prior contractual basis. Unless your Employment Contract or policy clearly allows TOIL for additional hours, the safer path is to pay for the overtime that you directed. A well-drafted Employment Contract can make this straightforward by setting out: normal hours, when overtime applies, and whether compensation is by TOIL, pay, or a mix.

Some operational scenarios to think through:

• Weekend or bank holiday cover – many businesses allow a day in lieu for a full shift worked on a public holiday, or enhanced pay plus a shorter TOIL entitlement. If your contracts say holiday entitlement is “inclusive of bank holidays”, make sure your TOIL rules still work with that. If this wording crops up in your contracts, read our explainer on bank holidays.
• Peak trading periods – during seasonal rushes, TOIL can reduce overtime costs. Consider caps on accrual to avoid large “banks” of time that are hard to schedule later.
• Unauthorised hours – hours worked without approval generally shouldn’t earn TOIL. State this clearly to avoid disputes.

Set The Rules In Writing: Contracts, Policies And Records

To avoid misunderstandings, set out your day in lieu rules in two places: the Employment Contract (high-level framework) and the Staff Handbook or overtime/TOIL policy (operational detail). Your policy should be consistent with any collective agreements or sector rules that apply to you.

What To Include In Your TOIL Policy

• Eligibility – who can accrue TOIL (e.g. all staff, or specific roles/levels)?
• Advance approval – TOIL only accrues for hours pre-approved by a manager.
• Accrual rate – minute-for-minute, hour-for-hour, or enhanced (e.g. time-and-a-half) for nights, weekends or bank holidays.
• Cut-off and caps – maximum TOIL balance; latest date by which TOIL must be taken (e.g. within 3 months of accrual).
• Booking process – how to request a lieu day, notice requirements, and the business’s right to refuse or reschedule based on operational needs.
• Interaction with annual leave – TOIL is separate from statutory holiday; clarify if TOIL can be attached to a holiday request and how it is recorded.
• Leavers – whether unused TOIL is paid out or forfeited on termination (ensure this aligns with the Employment Rights Act and your contractual terms).
• Unauthorised or missed breaks – state that missing rest breaks does not in itself create TOIL (and make sure employees still take legally required rest breaks).

As a best practice, keep the policy non-contractual (so you can amend it after consultation) but ensure the contract references that policy. Our Staff Handbook and Workplace Policy services help you set this up consistently across your team.

Record-Keeping

Accurate records are essential. Keep a robust log of:

• Approved additional hours (date, hours, reason, manager approval).
• TOIL accrued (at the correct rate) and TOIL taken.
• TOIL balances by employee, reviewed at least monthly.

This protects you if there’s a dispute and helps ensure you don’t breach average weekly limits or miss rest requirements under the Working Time Regulations.

How To Calculate And Approve Lieu Days

Your calculation method should be transparent, consistent and easy to administer. Here’s how many employers approach it in practice.

1) Choose Your Accrual Basis

• Hour-for-hour TOIL for ordinary additional hours (e.g. stay back 2 hours; accrue 2 hours TOIL).
• Enhanced TOIL for bank holidays/weekends (e.g. 1.5x or 2x) where you prefer time off to enhanced pay.
• Hybrid – enhanced pay for public holidays; hour-for-hour TOIL for other approved overtime.

Whatever you choose, state it clearly in your policy and contracts. If you rely on pay rather than TOIL for extra hours, set out your approach to overtime rates and approvals instead.

2) Pro-Rata For Part-Time Staff

Part-time employees shouldn’t be treated less favourably than full-timers. If a part-time worker’s “normal hours” are 20 per week and they work 4 extra hours at your request, they should accrue TOIL using the same formula as full-time staff – just measured against their contracted schedule.

3) Irregular And Zero-Hours Workers

For irregular hours or zero-hours arrangements, tie TOIL accrual to the specific shift pattern for that week and ensure the additional hours were requested and approved. Keep in mind that reforms and case law periodically affect these engagements, so ensure your policy aligns with current rules on zero-hour contracts.

4) Rounding And Minimum Units

Consider whether you’ll accrue TOIL in 15-minute increments (to avoid complex maths), and whether there’s a minimum block (e.g. a minimum of 30 minutes) to be taken at a time. Again, clarity prevents disputes.

5) Approval To Take A Lieu Day

Make it simple for staff to request a lieu day while keeping control over staffing levels. Set a minimum notice period for non-urgent requests and a fair process for prioritising competing requests. It’s reasonable to reserve the right to refuse or reschedule a lieu day for operational reasons, but exercise that right fairly.

Bank Holidays, Weekend Work And Overtime

A day in lieu is commonly used when employees work on weekends or bank holidays. Your rights and obligations depend on what your contracts say:

• Is weekend work “regular” in the role? If so, TOIL may accrue only for hours beyond the normal weekend pattern. If weekend work is exceptional, consider enhanced TOIL or enhanced pay.
• If a contract states holiday is “inclusive of bank holidays”, you’ll still need to be clear about compensation when someone actually works on a bank holiday – whether that’s a lieu day, premium pay, or both. If in doubt, revisit your contract wording on bank holidays.
• Ensure you’re not breaching rest and maximum working time rules when rostering weekend shifts.

If your business has frequent evening or weekend work, it may be simpler to codify an overtime model instead of TOIL. Set clear rates, approvals, and payroll processes, and remember to comply with National Minimum Wage calculations when averaged over the pay reference period. If you do offer a mix (some overtime paid, some TOIL), say exactly when each applies to avoid confusion.

Common Compliance Risks And How To Avoid Them

TOIL policies can go wrong in predictable ways. Here are the traps we see – and how you can stay on the right side of the law.

1) Breaching Working Time Limits

Even if someone “banks” TOIL, working excessive hours may breach the Working Time Regulations if staff don’t get minimum daily/weekly rest or if average weekly hours exceed 48 without an opt-out. Use rostering tools and approval gates for additional hours to protect rest periods. Keep an eye on cumulative hours after late finishes and before early starts.

2) Vague Or Missing Policy Wording

Ambiguity creates disputes. If it’s not clear how TOIL is earned, whether it’s enhanced for specific days, or when it expires, you’ll spend more time arguing than operating. Put the core rules in the Employment Contract and the operational detail in a policy. Our Employment Contract and Staff Handbook services are designed to lock in these foundations.

3) Letting TOIL Balances Get Out Of Hand

Large TOIL banks are hard to schedule later, can affect staffing, and can become a liability at termination. Set caps and expiry windows (e.g. use within 3 months unless otherwise agreed). Communicate balance reminders regularly so employees can plan time off.

4) Unauthorised Hours

If your policy is silent on this, employees may assume any extra time equals TOIL. Require advance approval for additional hours and state that unapproved time does not accrue TOIL unless subsequently confirmed by a manager.

5) Unlawful Deductions Or Forfeitures

Be careful with “forfeiture” on leaving. If your policy says unused TOIL is lost at termination, ensure the contract and policy support that position and you aren’t making an unlawful deduction from wages or wrongfully denying pay for work done. Review your approach alongside your rules on wage deductions.

6) Confusing TOIL With Paid Annual Leave

TOIL is not statutory annual leave. Don’t let TOIL be used to mask minimum holiday entitlements, and avoid “rolled-up” holiday pay practices. Keep separate records for statutory holiday and TOIL. If an employee is off sick or on family leave, follow your normal absence procedures rather than automatically converting TOIL to leave.

7) Disproportionate Impact On Certain Groups

If your TOIL policy makes it much harder for part-time workers or those with caring responsibilities to take accrued time off, you may face indirect discrimination claims. Apply criteria consistently, consider reasonable adjustments, and be flexible where you can.

8) Not Paying When TOIL Can’t Practically Be Taken

If the business consistently prevents employees from taking accrued TOIL within the window you’ve set, you should consider paying it out instead, or adjust staffing to enable time off. Persistent inability to take TOIL is a red flag that your policy isn’t working in practice.

9) Poor Processes Around Breaks And Overtime

Employees must still get their breaks and rest. TOIL should never be used to justify missed breaks or unrealistic shift patterns. Review your break rules and scheduling against your break obligations and ensure your overtime and TOIL policies work together smoothly.

Key Takeaways

• “Day in lieu” (TOIL) is a contractual arrangement – not a standalone legal right – so set clear, written rules in your Employment Contract and Staff Handbook.
• Make TOIL accrual conditional on manager approval, define accrual rates (hour-for-hour or enhanced) and set expiry windows and caps to keep balances manageable.
• Ensure compliance with the Working Time Regulations on average weekly hours, daily/weekly rest and paid holiday – TOIL doesn’t override statutory limits.
• Be explicit about weekend and bank holiday arrangements, especially where contracts say holiday is “inclusive of bank holidays”.
• Keep accurate records of additional hours, TOIL accrued and TOIL taken, and apply your policy consistently to avoid discrimination and wage disputes.
• If TOIL can’t practically be taken, consider paying out the balance and review your staffing model so the policy works in real life.

If you’d like tailored help drafting a TOIL policy, updating your Employment Contract, aligning your Staff Handbook, or sense-checking your approach to weekend shifts and overtime, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.