What should payment in lieu of notice (PILON) include?

Q: An employee who receives PILON does not receive some of the benefits that they would ordinarily have had had they been asked to work their notice period. Is this a potential issue for an employer?

Scott: For example, car allowance, use of vehicle, average overtime that would have been worked, company pension scheme, private medical cover, life insurance?’ There’s quite a lot of things that people get. The short answer is yes.

Seamus: Yeah. That’s it. For payment delayed notice, you should always take them back to the contract and there should be a clause within the contract that allows you to do that. A lot of times, it does happen that people do receive PILON that’s not in their contract, but they don’t mind because they’re having to work their notice period and they’re getting the money for it.

But at the higher level or not, then there’s all of the additional contractual benefits that are contained within the contract that might be excluded from that PILON period and the standard one would be that if you say you don’t need to work your notice under your contract of employment, but by the way, we’re taking your car off you today as well and it can leave the employee in substantial difficulties. So, it’s been clear about that as to what the entitlements are post the PILON period, but what would have been title two . . .

Scott: Including the name, really, it is notice of termination of dismissal that this is really what it’s about. Had you been allowed to work your notice, what would you have gotten during that 12-week period? You should be entitled to all those benefits. There should be a grossing up, if you like, so that people go away with the same amount or indeed, what you do, is you pay them garden leave. Effectively, they don’t come into work, but they get the benefits, they keep the car for those 12 weeks or they get an allowance that would allow them to get an equivalent.

Seamus: The garden leave period can be sometimes a better one for the employer if they’re worried about breaches of restrictive covenants and things like that. Sometimes it’s better to get the employee out on garden leave than it is to seek to breach any aspects of their contract as they panic about doing it. Certainly, there’s an entitlement to that under the legislation.