How much notice are you owed?
Look at your contract first. Then compare it with the statutory minimum:
- one week, once you have worked for a month;
- one week for each full year of service from two years;
- a maximum of 12 weeks at 12 years or more.
You get whichever is longer. Someone with 9 years' service and a contract that says one month is entitled to 9 weeks.
Three ways notice can be handled
| Working notice | Garden leave | Pay in lieu (PILON) | |
|---|---|---|---|
| Still employed? | Yes | Yes | No, employment ends now |
| Benefits and pension | Continue | Continue | Stop, unless the payment includes them |
| Free to start a new job? | No | No | Yes, subject to any covenants |
| When paid | Monthly | Monthly | Lump sum |
| Tax | As earnings | As earnings | As earnings |
What should be in the PILON figure
If your contract has a PILON clause, it will say whether the payment is basic salary only or includes benefits. If it has no PILON clause, ending your employment without notice is a breach of contract and you are entitled to damages for everything you would have received during notice. That includes:
- employer pension contributions;
- car allowance, medical cover and other benefits;
- contractual bonus or commission that would have been earned or paid in the period;
- share awards that would have vested. See bonus, shares and pension.
Employers often calculate PILON on basic pay alone. Ask how the figure was reached.
How PENP works
Whatever the agreement calls the payment, tax law treats the basic pay for your unworked notice as earnings. The formula is:
PENP = (basic pay in your last pay period × days of unworked notice ÷ days in that pay period) − any contractual PILON already taxed.
If you are paid monthly and your notice is in whole months, months can be used instead of days. The PENP amount is taxed and subject to National Insurance. Only what is left of the termination payment can use the £30,000 exemption. See tax and the £30,000 rule.
Basic pay for this purpose includes any salary you gave up under a salary sacrifice scheme. It excludes overtime, bonus, commission and benefits.
Garden leave and your restrictions
Time spent on garden leave is normally deducted from any post-termination restrictive covenants. If the agreement puts you on garden leave for three months and then applies a six-month non-compete in full, ask for the garden leave to be set off.
Leaving date and the 2027 changes
Whether notice is worked or paid in lieu changes your termination date. That date decides which year's statutory limits apply, and for dismissals around the turn of 2026 into 2027 it decides whether the new unfair dismissal rules apply. It also affects when the tribunal time limit starts running.
Frequently asked questions
Is PILON tax-free?
No. Since April 2018 all pay in lieu of notice is taxed as earnings and subject to National Insurance.
Can my employer pay me less than my contractual notice?
Not without your agreement. If the offer only includes statutory notice and your contract gives you more, you are being short-changed before compensation is even considered.
Is garden leave better than PILON?
It depends. Garden leave keeps benefits, pension and service running but stops you starting a new job. PILON frees you immediately and brings the money forward.
Does notice count towards my service?
If you work your notice or are on garden leave, yes. With PILON your employment ends at once, although statutory minimum notice is added when working out whether you have enough service for unfair dismissal or redundancy pay.
Sources
About this guide. This page is general information, not legal advice, and reflects the law and published government plans on the date shown above. Frederick George is a legal referral service, not a law firm. For advice on your own circumstances we will introduce you to an SRA-regulated solicitor.