Should we be including a payment in lieu of notice (PILON) clause in our employment contracts?
The short answer is YES.
On termination of employment, a business can decide whether to 1) terminate the contract early and pay the employee for the notice period (pay a PILON) or 2) allow the employee to remain employed for the notice period.
Until 6 April 2018, some employers chose not to have PILON clauses because it allowed them to make a payment, instead of allowing the employee to remain employed for the notice period, that was tax free up to £30,000. There is therefore no benefit to employers in not having a PILON clause in their employment contracts.
