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Replacing our ‘Believe it or not’ feature, this new Spotlight piece will focus on a small employment law topic each week and provide a bite size breakdown of it, starting with PILONs.
Pay in lieu of notice – PILON – is a mechanism employers can use to cut short the usual notice period. Whether the employee or employer is terminating the relationship, it’s the employer’s choice whether to PILON. When the employer does decide to PILON, this can be for all of or part of the notice period.
The key point to remember is that the employment will come to an end immediately and the employer must pay the employee in lieu of the balance of their notice period.
The advantages of using PILON are that the employee can be released from employment immediately – allowing them to start a new role with a new employer, and ensuring they’re kept away from the employer’s confidential information, clients and other valuable relationships. With a PILON clause drafted so that basic pay only is due, it can also be a way for the employer to potentially save some costs.
Employers should ensure that they have the contractual right to PILON before doing so, to avoid breach of contract claims. You should also check the wording of the clause carefully to see what payments are due – is it basic pay only? Or are benefits payable too?