If the business fails to provide the employee with notice of termination of employment, it will liable to the employee.
Some businesses have employment terms and conditions which enable them to pay the employee instead of providing full notice. This is a pay in lieu of notice clause (abbreviated to PILON) and it renders the payment in lieu of notice taxable.
If there is no PILON clause in the employment contract and the employer, as a matter of ‘custom and practice’, terminates the employment of its employees without notice and pays in lieu of that notice, then the payment is taxed.
Other elements of the termination package are taxed differently:
The financial package that the employer pays to the employee on termination of employment comprises different elements. It includes, but is not necessarily limited to, the compensation payment. Tax treatment is different for each component of the overall package.:
When are they used? What is in them? Use our guide to understand more about settlement agreements
Depends on a variety of factors. We will advise about the particulars of your situation and explain how much compensation is appropriate
Is a settlement agreement offered when employees are redundant? Find out more on our redundancy pages
We seek to address your legal needs in a way that suits you. For certain matters we can offer a fixed fee arrangement. Learn more about costs with Aeon settlements
Discover more about the terms that the employer will include in the settlement agreement.