Time off in lieu

What it means

Time off in lieu is paid time off that an employee takes instead of a supplement for work beyond normal working hours. The Labour Code allows it mainly for overtime and work on a public holiday, and under certain conditions for other extra work, if employer and employee agree.

For overtime the employee is entitled to pay for the hours worked plus a premium of at least 25 % of average earnings, more for hazardous work. If time off in lieu is agreed, the employee is paid for the overtime but the premium is replaced by time off equal to the overtime worked. No pay is due for the time off itself, as it was already paid for the overtime.

For holiday work the principle is similar: instead of the supplement of at least 100 % of average earnings, the employee may take time off in lieu, for which wage compensation is paid. The law sets a deadline for granting the time off, and if it is missed the supplement becomes payable.

How it works in practice

Time off in lieu requires precise attendance records: when overtime or holiday work occurred, which form of compensation the parties chose and when the time off was taken. The payroll system must know whether to pay a premium for given overtime or record an entitlement to time off.

For employers, time off in lieu is a way to reduce payroll costs in busy periods and balance them in quieter ones. With regular fluctuations, however, a working time account or uneven distribution of hours that fits the working time fund is often more suitable.

When employment ends, untaken time off in lieu must be settled. If the employee did not manage to take it, the premium they would otherwise have received is due. On departure we therefore always check the time-off records and pay any premiums in the final payslip.

What to watch out for

The most common mistake is imposing time off in lieu without agreement instead of paying the premium. For overtime the employee’s agreement is needed, and in an inspection the labour inspectorate will order the premiums to be paid retroactively.

The second mistake is untaken time off piling up for months with nobody tracking it. If it is not granted within the statutory period, an entitlement to the premium arises, and a large amount may accumulate by the time the employee leaves. Checking balances regularly is cheaper than a surprise at resignation.