A lot of companies exercise something known as “time off in lieu”. In this post, Legal Kitz will share everything you need to know about this legal term, and some commonly asked questions.
What is the meaning of time in lieu?
Commonly known as time in lieu, and time off in lieu, both terms can be used interchangeably. This term, put simply, refer to an agreement where the employer agrees to give an employee paid time off in lieu of the additional hours they worked outside of their standard contract hours instead of extra pay.
This is a good option for businesses who do not pay by the hour or would prefer giving their employees paid time off instead of paying for overtime, which benefits both parties.
What is the difference between time in lieu and overtime payments?
Overtime work is the work performed outside of regular hours listed in your employee’s award or their employment contract, and may slightly vary depending on the modern awards or enterprise agreements.
Employers will need to pay overtime if:
- Employees work beyond ordinary hours and are required to stay back and work more than 38 hours per week;
- Employees work outside the agreed number of hours; or
- They work outside the span of the ordinary hours or work.
Note that the number of hours may vary according to your relevant business industry and the employee’s award, and hence, advise your employees accordingly.
Essentially, time in lieu is an alternative to overtime pay which an employee would be entitled to. The benefits of offering time in lieu include:
- Supporting a healthy work-life balance;
- Preventing burnout;
- Flexible working hours and arrangements;
- Keeping costs under control; and
- Developing trust, openness and transparency.
What terms should a time in lieu agreement include?
The time in lieu agreement has to cover everything legal, regardless of whether they are a part-time, full-time or casual employee. The following should be considered:
- The method of calculating time off and time tracking.
- The number of hours and the time worked overtime.
- Evidence that both the employer and employee agree for this alternative arrangement instead of overtime pay.
- The rate of overtime pay.
- Arrangement details when it comes to requests (overtime instead of time in lieu, later dates, etc.).
- Employer must not influence or pressure employees when deciding between overtime pay or time in lieu.
- A method or arrangement to deal with unused time in lieu at the time of termination of the employees’ employment.
How do employees request time off in lieu?
It is critical to discuss with your employees whether they will receive overtime pay or time off in lieu when deciding such arrangements, as these may be covered under modern awards and enterprise agreements. This means that when employees work overtime and ask for time in lieu, employers have the right to refuse – in the same way that your employees cannot be forced to use time in lieu arrangements instead of overtime pay.
If no time in lieu award or registered agreement covers your employees, your employee will be entitled to take time off depending on the employer’s workplace policy or employment contract.
How much time in lieu are employees entitled to?
Generally, your employees can request as many hours of time in lieu as they like, as long as it is taken within six months. It is however recommended that employers have their policies regarding time in lieu to avoid any extra burden. For example, employers should be able to avoid circumstances where employees request for approval for their overtime hours used to finish their regular work.
How to calculate time in lieu?
It is important to note the specific modern awards and calculation methods that apply to the business and industry when calculating time in lieu.
There are generally two main methods of calculating time in lieu for your employees:
- Time for time – the number of hours worked overtime is equal to the amount of time off.
- Overtime rate – time off calculated according to the employee’s overtime rate. For example, an employee will be charged at a 150% rate for 2 hours of overtime and a double rate, 200%, for any work performed after that (3 hours). Thus, they will be entitled to 9 hours of paid time off.
Requesting your employees to work overtime?
When requesting your employees to work extra hours, it is important to keep in mind to be reasonable. If the request is unreasonably difficult at that given time, the employee can refuse to work the additional hours. This can depend on common factors like:
- Possible risk to the employees’ health or safety.
- The employees’ individual circumstances / responsibilities at that time.
- Compliance to modern awards, contracts and agreements.
- Employer needs additional help with a big project or deadline coming up.
- The role and responsibilities of the employee.
- Notice periods.
Legal advice
If you are unsure about how to best protect your business when it comes to time in lieu arrangements and the respective modern awards or enterprise agreements, Legal Kitz can assist you. To arrange a FREE consultation with one of our highly experienced solicitors, click here today, or contact us at [email protected] or 1300 988 954.