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United Kingdom

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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...

PENP calculation where PILON is paid as a pension contribution

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A Post-Employment Notice Pay (PENP) calculation

It uses a set calculation that lets employers identify the taxable portion of a severance package on termination of employment when the basic salary actually paid falls short of what would have been earned had proper or full notice been worked. The method takes basic pay, multiplies it by the remaining notice days, then divides by the number of days in the relevant pay period, before deducting in full any amounts paid net of tax, except for holiday pay and termination bonuses. The requirement to perform a PENP calculation stems from reforms that took effect from 6 April 2018, making all such payments in lieu of notice chargeable to tax and national insurance...

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Chris Bryden

4 King’s Bench Walk

Chris was called to the Bar in 2003 and since that time has built a busy practice across a range of areas, with an emphasis on Chancery practice. He enjoys a well-deserved reputation for his knowledge and expertise in each area. He appears regularly in the County Court, Family Court and the High Court as well as various specialist Tribunals, and has been involved in cases up to and including the Supreme Court. He regularly is instructed at Appellate level. He has extensive and wide-ranging experience particularly in the areas of wills, probate and inheritance disputes; property including adverse possession, boundary disputes and issues arising out of trusts of land; company and commercial work and financial remedies. Chris is head of the Family Group and head of the Property Team at 4KBW.Chris is the author of numerous articles in...

Web page updated on 27/05/2026

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