Payment in lieu of notice (PILON) in settlement agreements
What PILON means, how it interacts with notice periods and garden leave, and why tax treatment needs specialist input.
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What PILON means
Payment in lieu of notice is money your employer pays instead of you working your notice period. Whether you are entitled to PILON depends on your contract and the circumstances of termination. Settlement agreements often specify PILON alongside other sums.
Contract checks
Some contracts allow PILON only in certain situations; others include payment in lieu as a standard option. Clarify whether notice is worked, paid in lieu, or a mix, and how that interacts with garden leave.
Tax
Tax treatment can depend on how payments are labelled and on current HMRC rules. Read tax on settlement payments with your adviser—this guide does not provide tax advice.
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