Modern Award Review - TOIL Decision a Small Win for Employers

19th July 2015

The Fair Work Commission has decided to apply a standard provision allowing employers and employees to agree to paid time off work in lieu of overtime payment (TOIL). Time off work will be paid at the ordinary hourly rate.

The Full Bench of the Commission indicated that its provisional view is that the variation of modern awards to incorporate a model term is necessary to ensure that each modern award provides a fair and relevant minimum safety net. The Commission accepted flexible working arrangements, such as time off work in lieu of overtime (TOIL), may encourage greater workforce participation, particularly by workers with caring responsibilities. It also accepts that increasing workforce participation can result in increased economic output productivity. Available evidence supported a general finding that regardless of the industry employees work in, the most important aspect of determining employee satisfaction with their current job is the flexibility to balance work and non-work commitments.

Notwithstanding the administrative burdens imposed in the model clause (such as obtaining written agreement on each occasion) the decision to allow time off work at ordinary hourly rates of pay, rather than overtime equivalent time, is welcome. Many awards currently provide TOIL at the overtime equivalent.

The Commission is allowing a period of consultation on the proposed model clause before finalising its decision and varying modern awards. See the model clause below:

1. Time off in lieu of payment for overtime
1.1 An employee may elect with the consent of the employer to take time off in lieu of payment for overtime at a time or times agreed with the employer, in accordance with this clause.
1.2 The following requirements apply to an agreement to take time off in lieu of payment for overtime:
(a) A separate written agreement must be made by the employee and employer for each occasion on which overtime that has been worked is to be taken as time off in lieu. Each such agreement must:
(i) state when the employee started and ceased working overtime hours;
(ii) state that if requested by the employee the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment; and
(iii) be retained as an employee record.
(b) Overtime taken as time off during ordinary time hours shall be taken at the ordinary time rate; that is, an hour for each hour worked.
(c) The employee and employer must, within four weeks of the overtime being worked, agree on when the time off will be taken, otherwise payment for the overtime must be made to the employee at overtime rates in the first pay period after that four weeks.
(d) The time off in lieu of overtime must be taken within 12 weeks of the overtime being worked, otherwise payment for the overtime must be made to the employee at overtime rates in the first pay period after that 12 weeks.
(e) Notwithstanding sub clauses (c) and (d) above, if requested by an employee, the employer must pay the employee for any accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used. Payment must be made at the overtime rate applying to the overtime worked and must be made in the first pay period following the request for payment.
(f) If, upon termination of employment, an employee has an accrued entitlement to take time off in lieu of payment for overtime which the employee has not yet used, the employee must be paid for the overtime at the overtime rate applying to the overtime worked.
1.3 An employee who is entitled to request a change in working arrangements under section 65 of the Fair Work Act 2009 may make a request under that section for time off in lieu of payment for overtime at a time or times specified in the request or at a time or times to be subsequently agreed with the employer. This clause will apply to such time off in lieu. Pursuant to section 65(5) of the Fair Work Act 2009, the employer may refuse such a request only on reasonable business grounds.
1.4 An employer must not exert undue influence or undue pressure on an employee in relation to a decision by the employee to make, or not make, an agreement to take time off in lieu of payment for overtime.

Please contact me if you wish to discuss the implications for your business.