Banked Time in Canada: Rules, Benefits, and Best Practices

When employees work beyond their standard hours, the traditional solution is overtime pay. However, a growing number of Canadian workplaces are turning to a more flexible alternative: Banked time.

While this approach offers advantages for both workers and employers, it is not as simple as an informal agreement. Banked time in Canada comes with specific legal requirements and administrative obligations that vary by jurisdiction.

What is Banked time in Canada?

Banked time, also known as “Time Off in Lieu (TOIL)” or “compensatory time off,” is paid time off that employees earn instead of receiving overtime wages.

When employees work beyond their regular hours (commonly defined as 8 hours per day or 44 hours per week under federal standards), they can choose to accrue equivalent paid time off rather than receive overtime pay at 1.5 times their regular hourly rate.

Unlike overtime pay, banked time offers greater scheduling flexibility rather than immediate financial compensation. Importantly, employers cannot force TOIL on anyone; employees must voluntarily agree to it through written documentation.

Both federal and provincial employment standards legislation have specific rules on banked time arrangements, including required accrual rates, time limits for using banked time, and formal agreement procedures.

How Does Banked Time Work?

The banked time process includes the following four steps:

Step 1: Pre-authorization

Employer and employee establish a written banked time agreement specifying accrual rate, usage time frames, and restrictions on when banked time can be taken before overtime is worked.

Step 2: Overtime Work and Accrual

When employees work overtime, hours of work are recorded and converted to banked time at the agreed rate (typically 1.5x). For example, four overtime hours become banked 6 hours of time off in lieu. Employers must track both overtime worked and TOIL accrued.

Step 3: Requesting Time Off

Employees request banked time following standard time-off procedures. Employers can deny requests during critical business periods if specified in the banked time policy, but must provide reasonable opportunities to use accrued time within required time frames.

Step 4: Taking banked time

When employees use banked time, hours are deducted from their balance. Time off is paid at the regular hourly rate, identical to vacation pay. Employers update records to reflect hours used.

Many companies set a limit on the amount of banked time you can save up, typically 40 to 80 hours. This helps prevent major staffing gaps if many employees request leave at once. Some policies may also require you to use some of your accrued time before you can earn more.

What are the Benefits of Banked Time for Employees?

Banked time offers three advantages that make it a valuable option for employees:

• Improved Work-Life Balance: banked time allows employees to recover after intense work periods, supporting mental health and preventing burnout.
• Increased Flexibility and Control: Employees can use banked time to extend vacations, create long weekends, or handle personal matters, giving them autonomy over their compensation.
• Enhanced Job Satisfaction: Offering a choice between time and money demonstrates trust and respect, which can boost morale and loyalty. 

That said, giving the staff the choice between an overtime payment or banking the hours shows that the company care about employees’ needs. When employees feel that their time is valued, satisfaction naturally increases.

What are the Benefits of Banked time for Employers?

For employers, banked time offers strategic operational and financial benefits that strengthen workforce performance and organizational efficiency.

• Effective Cost Management: banked time converts an immediate cash expense (premium overtime pay) into a deferred, non-premium liability (paid time off at the regular rate), improving cash flow management.
• Enhanced Employee Retention: In a competitive labour market, flexible benefits like TOIL are a significant differentiator that can attract and retain top talent.
• Increased Productivity: Well-rested employees are more focused and productive. By encouraging breaks after crunch periods, TOIL helps maintain a high-performing workforce.
• Operational Flexibility: Staffing can be aligned with business cycles. For example, retail staff can work extra hours during the statutory holidays in Canada and use their TOIL during the slower post-holiday season.

Is Banked Time Legal in Canada?

Banked time is legal in Canada when employers comply with specific conditions established by federal or provincial employment standards legislation.

The Canada Labour Code governs time off in lieu for approximately 6% of federally regulated workplaces. Provincial employment standards acts regulate TOIL for the remaining 94% of workers. (source)

Federal requirements under Canada Labour Code Part III:

• Accrual rate: 1.5 hours of time off for each overtime hour worked
• Written agreement: Mandatory documentation between employer and employee before overtime occurs
• Time frame: TOIL must be taken within 3 months of the pay period when overtime was worked, unless a longer period (up to 12 months) is agreed in writing
• Record-keeping: Employers must maintain overtime, accrual, and usage records for a minimum of 3 years
• Voluntary participation: Employers cannot force TOIL instead of overtime pay without documented employee consent

What Are the Provincial Rules for Banked Time Across Canada?

Employment standards for banked time vary across Canada’s 13 jurisdictions. While 10 provinces and territories permit banked time arrangements, three jurisdictions require overtime pay exclusively.

Source: Why offer time off in lieu? – hrreporter.com

Employers operating in multiple provinces must comply with the employment standards specific to each jurisdiction where employees work. When collective agreements exist, those provisions may override standard employment standards where they are more favourable to employees.

Regulatory compliance note (as of November 2025): Employment standards change periodically. Consult your provincial or territorial labour standards office for current requirements before implementing TOIL policies.

How Do Employers Create an Effective Banked Time Policy?

A complete written policy prevents misunderstandings, ensures legal compliance, and maximizes benefits for employers and employees. Here is how to create a clear and practical policy:

Develop a Written Banked Time Policy

Create a complete document defining all terms and conditions, including eligible employees, accrual rates, approval processes, time frames for using banked time, maximum accrual limits, and request procedures. Ensure policy compliance with jurisdictional employment standards and alignment with collective agreements.

Obtain Written Agreements with Employees

In addition to the general policy, employers must secure written agreements from each participating employee before overtime occurs. Include specific terms: accrual rate, time limits for using banked time, and procedures for handling unused banked time when employment ends.

Implement Accurate Tracking and Record-Keeping

Use reliable systems, such as HR software, time-tracking applications, or detailed spreadsheets, to track overtime worked, TOIL accrued, and TOIL taken for each employee. Maintain records for at least 3 years as required by most employment standards legislation. 

Establish Clear Approval Processes

Define exactly how employees request banked time and how managers review those requests. An effective process includes:

• Notice periods: Commonly two weeks for planned time off
• Clear criteria for approval: So decisions are consistent and transparent

While employers can deny banked time during peak or critical periods, employees must still be given a fair opportunity to use their banked hours before they expire.

Set and Enforce Maximum Accrual Limits

To prevent staffing challenges and financial liability, set a clear cap on TOIL balances, typically 40 to 80 hours. When employees approach the limit, require them to:

• Schedule time off, or
• Have excess hours paid out as overtime

This keeps TOIL banks manageable and compliant.

Communicate the Policy Clearly

Ensure all employees understand how banked time works, their rights and responsibilities, and procedures for accruing and using banked time. Provide training for managers and supervisors on consistent policy administration. 

Review and Update the Policy Regularly

Review banked time policies annually or when employment standards legislation changes. Assess policy effectiveness, gather employee and manager feedback, and adjust as needed to ensure continued compliance with current federal or provincial regulations.

What Should an Employee Know Before Accepting a Banked Time Agreement?

If your employer offers a banked time agreement, here is what you need to know to protect your rights and make the most of the flexibility.

• It is Your Choice: You cannot be forced to accept banked time instead of overtime pay. If you prefer cash, you have the right to refuse to sign a banked time agreement.
• Get It in Writing: Never agree to a verbal TOIL arrangement. Insist on a formal written agreement that details the accrual rate, usage deadlines, and your rights.
• Track Your Hours: Keep your own records of overtime hours worked and banked time taken. Periodically compare your records with the official statement from your employer to catch any discrepancies early.
• Know the Deadlines: Be aware of the expiry date for your banked time. Plan to use it well before the deadline to avoid any scheduling conflicts. If it expires, your employer is legally required to pay it out at the 1.5x overtime rate.
• Understand Your Rights in Quebec: In Quebec, the law is powerful. Even with an agreement, you can change your mind and request a cash payout for your banked hours at any time before the 12-month limit is up.
• What to Do in a Dispute: If you believe your employer is not complying with the law, your first step should be to discuss it with your manager or HR, referencing your written agreement. If that option does not work, you can submit a complaint with the Employment Standards Branch in your province or territory.

Banked Hours vs Overtime Pay: What is the Better Choice?

The choice between banked time and overtime pay depends on business circumstances, employee preferences, and operational requirements.

The table below compares Banked Time vs Overtime Pay based on key factors.

Many companies adopt a flexible, hybrid model where employees or managers can choose between banked time and overtime pay based on the situation.

The Bottom Line 

Banked time gives employees more flexibility and employers a way to manage overtime costs. However, this arrangement only works if it is handled with strict attention to legal rules and careful administration. If you are ever in doubt about the rules, especially if you operate in multiple provinces or are part of a union, consulting with an HR or legal expert is the best course of action.

Frequently Asked Questions About Banked Time