Payment in lieu of notice (PILON)

A payment to an employee (usually a lump sum) rather than requiring them to serve out their statutory or contractual notice period. A contract of employment often contains a PILON clause permitting such a payment. If there is no PILON clause then an employer who pays a PILON instead of requiring the employee to serve their notice period will be in breach of contract, and the PILON therefore represents damages for that breach. Instead of placing an employee on gardening leave or making them work their notice, an employer can end the contract of employment earlier by making a payment to the employee that is equivalent to the amount they would have received had they worked their notice.

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