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Home > Resources > HR compliance > Pay and benefits compliance > How to make a payment in lieu of notice
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How to make a payment in lieu of notice

A payment in lieu of notice allows an employer to terminate employment immediately by paying notice pay instead of requiring the employee to work their notice period. This guide explains when a PILON can be used, the contractual and tax implications, and how to calculate payments correctly.

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By Darren Newman, Brightmine Consultant Editor

Consider including a right to terminate with a payment in lieu of notice in employment contracts.

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  • What is a payment in lieu of notice?
  • Contractual provision for payment in lieu of notice
  • When is a payment in lieu of notice appropriate?
  • Should a settlement agreement be used with a payment in lieu of notice?
  • When is a period of garden leave more appropriate than a payment in lieu of notice?
  • Confidential information and company property
  • Making the payment in lieu of notice
  • Benefits in kind
  • Payment for holiday entitlement that would have accrued during the notice period
  • Calculation of redundancy payments where a payment is made in lieu of notice
  • Taxation of payments in lieu of notice

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Latest updates

Updated to reflect changes to the rules on taxation of payments in lieu of notice from 6 April 2018.

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About the author

Darren Newman, Employment Lawyer at Brightmine

Darren Newman
Employment Lawyer, Employment Law Ltd

Darren Newman is an employment lawyer and consultant editor at Brightmine. He qualified at the Bar in 1990, and has extensive experience of representing both employers and employees in the employment tribunal. Darren has provided employment law training to major government departments, commercial organisations, local authorities and public bodies.

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