Can I provide payment in lieu of notice (PILON) to an employee if there is no contract clause?
If the contract includes a Pay in Lieu of Notice (PILON) clause, the employer can terminate the contract and make one payment that represents the money that would have been paid during the notice period.
If there is no PILON clause, then doing this without the employee’s prior agreement would amount to a breach of contract and could lead to a claim of wrongful dismissal. However, if you have paid the employee for the notice period, the employee would achieve no material gain by bringing such a claim. Nevertheless, you should be aware that a dismissal that breaches the contract will mean that post-termination restrictions (e.g. a restrictive covenant) would not apply.
It is also possible (and often recommended) to instead, place the employee on garden leave or agree a settlement with the employee using a settlement agreement. If you can agree a settlement, you could agree a date on which the employment ends, the amount to be paid, and confirm any post-termination restrictions that will remain.
For more information or to book an HR consultation please contact Karen Scott on 07762 629 448 or get in touch by clicking here.
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