Jurisdiction(s):
United Kingdom

Key definition

Payment In Lieu Of Notice definition

What does Payment In Lieu Of Notice mean? Payment in lieu of notice (PILON) is a payment by an employer that ends employment immediately instead of the employee working their notice period. It is a descriptive employment-law term used across the UK and Ireland and operates primarily as a matter of contract, with its effect informed by case law. Where the employment contract contains an express PILON clause, the employer may terminate summarily by making (and usually notifying) a payment calculated by reference to the contractual or statutory notice period. Drafting should state what is included (basic pay only or also benefits/bonus), the timing of payment...

Template employer letter exercising contractual PILON: immediate termination, payment calculation, tax and National Insurance, cessation of benefits, return of property, and post-termination restrictions

Published by a LexisNexis Employment expert

Precedents

[ Enter name and address of employee ]

[ Enter date ]

Dear [ enter name ]

Termination of employment by Payment In Lieu Of Notice

[ Following our discussion earlier today, I OR I ] write to inform you that [ enter name of Employer ] has chosen to invoke its entitlement (under clause [ enter clause number ] of your [ service agreement OR Contract of employment ] dated [ enter date ] (described in this letter as the [ ‘Service Agreement’ OR ‘Contract’ ])) to bring your employment to an immediate end by issuing this written notice and making a payment in lieu of notice (described in this letter as the ‘Payment’).

[ This letter also makes reference to various other terms as defined in the [ Service Agreement OR Contract ] ]...

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Web page updated on 22/05/2026

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