Time off in lieu can offer an alternative to paid overtime in some scenarios. But what obligations do you have to your employees?
In 2020, full-time employees in Australia worked, on average, more than six hours of unpaid overtime every week, according to research by the Centre for the Future of Work.
With more people working from home than ever before, it’s easy for the boundaries between work and home life to become slippery.
While chronic overtime should be avoided, occasional overtime is a reality for many jobs. But it raises questions for HR. Are workers entitled to overtime pay or time off in lieu (TOIL)? And what do employers need to do to avoid underpayment claims?
Aaron Goonrey, partner at law firm Lander & Rogers, tells us how employers can stay out of trouble in these scenarios.
When is an employee entitled to overtime or time off in lieu?
Time off in lieu (TOIL) is sometimes offered to employees who’ve worked outside their usual hours as an alternative to extra financial compensation.
Goonrey says if an employee is covered by a modern award or enterprise agreement, they may be eligible for paid overtime or TOIL. But if they are not, their employment contract will unlikely include TOIL or overtime provisions unless there is some company practice or convention.
He says some modern awards include a TOIL model clause, which provides, among other things, for an employee to take paid time off instead of receiving overtime pay. It may also specify how TOIL is calculated and how employees and employers agree to it, such as if it needs to be in writing.
But there is variation between awards.
“In terms of modern awards, there isn’t a one-size-fits-all approach,” says Goonrey. “[For example], some TOIL terms may have slight variations in them to accommodate the industry, or because of submissions made by various employer groups or unions.”
For example, the Hair and Beauty award specifies that TOIL is calculated at the rate of pay. So, if an hour of overtime is worked at double-time pay, the employee receives two hours of time off. The Clerk – Private Sector award, however, simply states that one hour of overtime equals one hour of time off.
Goonrey says, to be safe, employers should always refer to the instrument that covers their employees, whether this is a modern award, enterprise agreement or employment contract.
When should you grant TOIL?
If an employee has requested TOIL, the employer doesn’t necessarily have to accept (and vice versa) but giving employees the option can suit flexible working.
Goonrey says some businesses have policies that actually prevent people working overtime, unless they have express permission. This avoids a scenario in which someone wants to stay late at work because they haven’t finished their ordinary tasks and then asks for paid overtime or TOIL.
“If the employee works overtime regardless of the employer’s direction, the employer may have a defence to say, we have a policy or convention in place that provides that an employee needs to have permission, and the employee was aware of those rules,” he says.
He also reminds that, if an employer breaches a modern award, the ramifications can be significant.
“An employee could initiate an industrial dispute; the Fair Work Ombudsman may investigate the alleged breach; there could be civil penalties – depending on what the breach is,” he says.
Goonrey says it’s also worth hammering out a policy that covers how employees receive TOIL.
“Before you grant TOIL, you should make sure there is, for instance, an agreement or policy or procedure that actually regulates how an employee would receive TOIL,” he says.
“Because it’s not simply a notion of an employee applies for and gets TOIL. There are other mechanics involved – it’s not as straightforward as many people may think.”
When can employers ask staff to work extra hours?
Now you know when overtime or TOIL applies and how to manage a request, so what rights do you have as an employer to request employees to work more hours on top of their regular workload? It comes down to what’s considered as “reasonable additional hours”.
That’s a little ambiguous, right? What should be considered as “reasonable”? Goonrey says it differs according to a variety of factors.
“For example, it may be when a project deadline is due or there’s a deadline given by a client or supplier or customer. “
However, the employee has the right to refuse to work the proposed additional hours if it is unreasonable for them to do so. For example, if they have caring responsibilities.
There are some other important factors to keep in mind when determining if an overtime request is reasonable or not. In an article for Business Australia, Nigel Ward, CEO and director of Australian Business Lawyers & Advisors, outlined some considerations:
- Any risks to health and safety (i.e. have they been doing a lot of overtime lately?)
- The employee’s personal circumstances (i.e. are they a working parent who needs to be at home with their kids by a certain time?).
- The needs of the business (as per Goonrey’s example about a project deadline).
- Whether the employee is entitled to receive overtime payments, penalty rates or other compensation for (or a level of remuneration that reflects an expectation of working additional hours).
- The notice given by the employer to work the additional hours.
- The notice given by the employee of their intention to refuse to work the additional hours.
- The usual patterns of work in the industry.
- The nature of the employee’s role and level of responsibility.
- Whether the additional hours are in accordance with a modern award or agreement that is applicable to the employee.
What happens when longer hours become chronic in a workplace?
Goonrey says frequent additional hours open employers up to risks related to both underpayment and workplace health and safety.
“We see that employees are burning out because they’re not able to disengage from their devices and their work,” he says.
Initiatives like Go Home on Time Day, and the “right to disconnect” implemented in some European countries, remind of the need to protect work-life balance. Compensating employees fairly for their overtime can help employers avoid allegations of ‘time theft’ or underpayment.
TOIL quick facts
Remember that awards, enterprise agreements and employment contracts do differ, so you’ll need to check your individual situation, but here are some common TOIL aspects in modern awards.
- TOIL must be taken within six months of the additional hours being worked.
- Employers can ask staff to work “reasonable additional hours” but staff can refuse if “unreasonable” for them.
- TOIL is by agreement. The employer can refuse if it’s deemed as unreasonable. And the employee can also refuse to work additional hours, if it’s deemed unreasonable.
- The employee can change their mind and ask to receive the overtime as pay (if TOIL and unpaid overtime are featured in their contract, Award or EBA).
- If employment comes to an end, the TOIL or overtime must be paid out to the employees (again, if TOIL and unpaid overtime are featured in their contract, Award or EBA).
Employment law is a constantly evolving subject. Make sure you’re up to speed with AHRI’s Introduction to HR Law short course.