Pay in Lieu of Notice (PILON)
A payment covering the notice period so employment can end immediately.
Pay in lieu of notice, often shortened to PILON, is a payment an employer makes so that employment can end straight away instead of the employee working out their notice period. The payment reflects what the employee would have earned during that time.
PILON is useful where an employer wants the person to leave immediately — for example on a sensitive departure — while still honouring their financial entitlement. Its tax treatment and whether it triggers other contractual payments depend on how the contract is drafted.
To rely on PILON safely, employers usually need a clause in the contract permitting it; paying in lieu without one can amount to a breach and affect enforceability of terms such as restrictive covenants. In Ireland and the UK the contract wording and current tax rules should always be checked.
