Time Off In Lieu or TOIL allows an employee to work overtime, and instead of being paid additional remuneration for working such overtime, the Employee is granted paid time off work by their Employer, to the equivalent of the overtime worked.

Accruing Time Off in Lieu

Time Off in Lieu is accrued on an ad hoc basis in the instance that an Employee works additional hours and then chooses to take time off instead of getting paid (or the Employer does not wish to pay overtime). You can accrue Time Off in Lieu both manually by entering the hours directly into the Employee's Pay or via Timesheets. 

Applying/Taking Time Off in Lieu

As Time Off in Lieu in Xero is set up like any other leave item, it can be processed by getting the Employee to apply for it either via the Xero My Payroll or Xero Me Phone App. Alternatively, this can be centrally processed via the Leave Tab in Xero.

Pay Out Time Off in Lieu at Termination of Employment

Time Off in Lieu is paid out at termination of employment at overtime rates, the applicable tax on the payout is part of the taxable Employment Termination Payments (ETP).

Accruing Time Off in Lieu

Time Off in Lieu can be accrued by entering the hours directly into the Pay each pay run or first through Timesheets and then added in the Pay Run

Accruing Time off in Lieu via Timesheets

1. Go to Payroll > Timesheets
   
   è  The Timesheets screen opens
   
   
2. Click on [Add Timesheet]
   
   è  The Add Timesheet screen opens
   
   
   
3. Select the Employee and Pay period and click on [Save]
   
   è  The Employee's Timesheet screen opens
   
   
4. Enter your Timesheet Pay Items as per normal and track any time off in lieu in a separate line using the Pay Item: Time Off in Lieu Earned
5. Click on [Approve] to finalise the Timesheet

Record Time Off in Lieu on the Employee's Pay

1. Go to Payroll > Pay Runs
2. Click on [Add Pay Run]
   
   è  The Add Pay Run pop up screen opens
   
   
3. Select the correct pay period and click on [Next]
4. Open the employee’s pay
5. Scroll to the Time Off in Lieu Leave Type and enter the number of hours accrued for the pay period
   Note: if you have tracked the Time Off in Lieu earned through Timesheets copy the total hours from the Time Off in Lieu Earned Earnings Line into the Time Off in Lieu Leave Type. 
   
   è  The Employee Pay
   
   
   
   
6. Click on [Save]
7. Finalise the Pay Run as per normal

Payout Time Off in Lieu at termination

1. Go to Payroll > Pay Runs
2. Click on [+Add Pay Run]
   
   è  The Add Pay Run pop up screen opens
   
   
3. Select the correct pay period and click on [Next]
4. Open the employee’s pay
5. Click on [Set as Final Pay]
   
   è  The Set as Final Pay screen opens
   
   
   
   
6. Select/Enter the following details:
   • Termination Date > Select the employee's termination date
   • Reason for termination > Select the termination reason
   • Select last full pay period > Select this option 
   • Enter average earnings > Do not select this option
   • Select an example of a normal full pay period > Select a pay period that reflects the correct gross pay for the Employee
7. Click on [Save]
   
   è  The Time Off in Lieu is paid out and 32% ETP tax is calculated on the payout
   
   
   
   
8. Adjust the Tax calculation if required
9. Click on [Save]
10. Finalise the Pay Run as per normal