Q&As

If an employee asks for a lump-sum to be paid to their pension instead of a payment in lieu of notice, how might this affect a post-employment notice pay (PENP) calculation?

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Produced in partnership with Chris Bryden of 4 King’s Bench Walk
Published on LexisPSL on 10/10/2019

The following Employment Q&A produced in partnership with Chris Bryden of 4 King’s Bench Walk provides comprehensive and up to date legal information covering:

  • If an employee asks for a lump-sum to be paid to their pension instead of a payment in lieu of notice, how might this affect a post-employment notice pay (PENP) calculation?

A Post-Employment Notice Pay (PENP) calculation is based on a formula that enables an employer to determine the taxable element of a termination award where the amount of basic pay that an employee receives is less than they would have done had they been given full or proper notice. The formula is basic pay multiplied by the number of unexpired notice days divided by the number of days in the pay period, minus any sums other than holiday pay and termination bonuses that are paid net of tax. The need for the PENP calculation is as a result of changes made from 6 April 2018 which made all payments in lieu of notice chargeable to tax and national insurance. This corrected an anomaly as to the tax treatment of contractual an

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