Q&A - how is a PILON calculated?
Q. How should a payment in lieu of notice (PILON) be calculated?
A. A PILON is made to an employee when their employment is terminated without notice. This could occur for various reasons, e.g. because the employee is summarily dismissed for gross misconduct or made redundant. These types of payment should be calculated to include all of the remuneration and benefits to which the employee would have ordinarily been entitled under the terms of their employment contract during what would have been their notice period.
This includes any contractual benefits, such as commission, bonuses, medical or life insurance. Non-contractual benefits can be excluded. A payment for lost contractual benefits can only be lawfully excluded from the PILON where the employment contract provides for it, i.e. there is a clause which states that any PILON made will be limited to basic salary only (see The next step ).
For an employee contract pay in lieu of notice clause, visit https://www.tips-and-advice.co.uk , Download Zone, year 22, issue 19.
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