How should I calculate time off in lieu for overtime?

Question

I'm a little bit confused about how time off in lieu is calculated. I'm in Alberta where the government says:

"Sometimes, instead of paying overtime pay, an employer may give an employee time off work with pay (banked overtime) at a rate of 1.5 hours for each overtime hour worked as part of an overtime agreement between the employer and employee."

Notice it says "with pay". I realize the rules in different jurisdictions may be different, but I'm assuming the rules are typically very similar and so somebody should be able to clarify this for me.

So let's say this is a normal work day for Joe.

But yesterday he worked an extra hour.

Obviously the first 8 hours are paid. Let's say, for simplicity's sake, $10 per hour. Now if we paid the last hour as overtime, we would pay for that hour $15. So that would be a total of $95.

However, if we give this employee time off in lieu for that over time hour instead, according to the rule I posted above, then don't they also get that same $95 plus 1.5 hours off work?

That seems like a double benefit to me so why on earth would an employer give them that? Why not just pay the $15 for the overtime and let them come to work their regular shift. Yet a lot of employers do this, so this is why I feel like I'm misunderstanding this.

Can somebody explain to me how this works?

Answer 1

It simply means you get paid "normally" "as if" you were there.

Say you get $10 an hour normally. It's an 8 hour a day. That's $80.

Every single day, the paymaster hands you $80.

On Monday you work one hour overtime.

Question - how much are you owed?

You are owed $15.

"... an employer may give an employee time off work with pay ..."

How much time off?

"...at a rate of 1.5 hours for each overtime hour worked..."

So on Tuesday you get 1.5 hours off. You work only 6.5 hours on Tuesday, not the usual 8.

However, at the end of the day on Tuesday, they hand you the usual $80.

You "should have" only been paid $65 on Tuesday. (6.5 hours.) But in reality you get $80. Eight crisp tens baby! Notice you got an extra $15. NOtice in the 6th line of this post it says you are owed $15. et voilà!

It's that simple.

I believe the phrase confusing you is:

"time off work with pay"

They simply mean that on the Tuesday you get time off work (in fact, 1.5 hours) with normal pay, just as if you worked the 1.5 hours.

the phrase

"time off work with pay"

means "time off your NORMAL work, but still getting the NORMAL pay for that NORMAL day"

In the example, 1.5 hours "off work" on Tuesday - but you still get that $15 pay on Tueaday!

It makes sense?

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So in answer to your question

How should I calculate time off in lieu for overtime?

1. Write down how many hours overtime you worked on Monday. Let's say "3".

2. Multiply that by 1.5 and write it down. So, "4.5"

3. On Tuesday, work that many hours less. So for example, you normally work 6 hours, so, work (6 - 4.5) == 1.5 hours only. And then go home!

4. Collect your pay totally normally for Tuesday.

That's it.

Noptice you got "employee time off work" {you went home way early on Tuesday) and it was "with pay" - i.e. with your usual pay for Tuesday, as if you worked the whole 6 hours!

Answer 2

Time off in lieu (or TOIL) is pretty much what it says on the tin... it is time off in lieu of pay.

"Sometimes, instead of paying overtime pay, an employer may give an employee time off work with pay (banked overtime) at a rate of 1.5 hours for each overtime hour worked as part of an overtime agreement between the employer and employee."

So, the employer may simply pay the full overtime rate for that extra hour, and the employee work their full shift the next day (at full pay) or the employee gets 1.5 hours off at a later date without being paid for the overtime (they get paid eight hours on both days, even though they worked an extra hour one day and left 1.5 hours early the next).

However, sometimes, a company may have a bit of a mixed policy. For example, I've worked at places where the overtime was matched with TOIL at a 1:1 ratio, and then any penalty rate was applied on top - so for one hour overtime at the weekend, you would accrue one hour of TOIL and be paid for an extra half hour (instead of just being paid a full 1.5 hours and gaining no TOIL).

In some companies, TOIL vs overtime pay is agreed case by case. So, if a manager asks you to work overtime you can negotiate either TOIL or extra pay.

TOIL policies often come with expiry and limit clauses - such as TOIL must be spent within a certain period after accrual or it will evaporate; TOIL cannot be in excess of so many hours. Sometimes, TOIL may also be lost on termination/resignation (unlike paid annual leave). Different jurisdictions will have different laws around what companies can and can't do with TOIL and overtime. And you should always read your work agreement or employment contract to see what your employer is offering and what limitations there are.