Pay in Lieu of Notice UK (PILON): Your Rights Explained

Yes, if your contract includes a payment in lieu of notice (PILON) clause, your employer can end your employment immediately and pay you a lump sum instead of having you work your notice period. Without that clause, they can still make the offer, but you have the right to refuse and work your notice instead.

Use the UK notice period calculator to find out how many weeks your notice period is before you decide whether to accept PILON.

What is payment in lieu of notice?

Payment in lieu of notice is when your employer ends your employment on the spot and pays you the equivalent of your notice period as a lump sum, rather than having you work it out. Your employment ends immediately rather than at the end of a notice period.

This is different from garden leave, where you remain employed and on the payroll throughout your notice period but are not required to attend work.

When can your employer use PILON?

If your contract has a PILON clause: Your employer can trigger PILON without your consent. The clause gives them the contractual right to end employment immediately with a cash payment. This is common in professional and senior roles.

If your contract has no PILON clause: Your employer can still offer payment in lieu of notice, but you are not required to accept. You are within your rights to work your full notice period and be paid in the normal way each month. Forcing you to leave immediately without a PILON clause and without your agreement can be treated as a breach of contract.

To check whether your contract has a PILON clause, look at the notice or termination section. It will typically say something like “the Company reserves the right to make a payment in lieu of notice” or “the Company may pay basic salary in lieu of all or part of the notice period.”

Sources: gov.uk/handing-in-your-notice/payment-during-your-notice-period and acas.org.uk/notice-periods/when-an-employee-is-not-required-to-work-their-notice, last verified June 2026.

What does PILON include?

Your PILON must cover your basic pay for the full notice period as a minimum. Bonuses, commission, pension contributions, and other benefits are included only where your contract or PILON terms require them.

Worked example: Your notice period is 4 weeks and your gross basic pay is £600 per week. Your PILON would be at least £2,400 before tax and National Insurance. Accrued holiday pay and any additional amounts required by your contract would be calculated separately.

If your contract has a PILON clause, check its exact wording. Many specify basic salary only. If the clause says “basic salary in lieu of notice,” bonuses and commission are not included even if you would normally earn them during a worked notice period.

Is PILON taxed?

Yes. PILON is fully subject to income tax and National Insurance from the first pound. It does not benefit from the £30,000 tax-free threshold that applies to some other termination payments, such as statutory redundancy pay.

HMRC treats all PILON as earnings through the post-employment notice pay (PENP) rules, regardless of whether your contract includes a PILON clause. Your employer deducts tax and National Insurance before paying you, the same as they would from your monthly salary.

Sources: gov.uk/termination-payments-and-tax-when-you-leave-a-job/what-you-pay-tax-and-national-insurance-on and gov.uk/hmrc-internal-manuals/employment-income-manual/eim13874, last verified June 2026.

Can you refuse PILON?

If your contract has a PILON clause, no. Your employer can exercise the clause without your consent and your employment ends on the day they specify.

If your contract has no PILON clause, yes. You are entitled to work your full notice period and be paid in the normal way. If your employer insists on immediate departure without a clause and without your agreement, this could give rise to a wrongful dismissal claim.

What if the PILON payment is short?

If you believe your PILON is incorrect (for example, the lump sum covers fewer weeks than your notice period, or your PILON clause explicitly includes bonuses that were not paid), raise it with your employer first. If that does not resolve it, you can use your company’s formal grievance procedure or make a breach of contract claim at an employment tribunal.