Payments in lieu of notice

Copyright © 2026 LexisNexis
Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP
Employment Tax
Guidance

Payments in lieu of notice

Copyright © 2026 LexisNexis
Produced by Tolley in association with Sue El Hachmi of Osborne Clarke LLP
Employment Tax
Guidance
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Payments in lieu of notice are known as PILONs. In essence, a PILON is a payment made to an employee when proper notice of termination is not given. The PILON is paid to compensate for the wages and benefits not received during what should have been the notice period.

What payments are PILONs?

In the House of Lords case of Delaney v Staples, Lord Browne-Wilkinson helpfully summarised payments that may be classed as PILONs into four categories. This case was not a tax case but is very useful in understanding the different types of payments that can be made. The categories are discussed below:

  1. •

    an employer gives proper notice of termination to an employee, but does not require the employee to attend work up to the termination date and pays them the wages attributable to the notice period. This situation is commonly called ‘Garden Leave’, see the Garden leave and the right to work guidance note. There is no breach of contract by the employer. The employment continues

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Sue El Hachmi
Sue El Hachmi

Senior Associate at Osborne Clarke

Sue advises on the design and implementation of employee incentive arrangements for private and public companies, including all types of tax-advantaged plans and bespoke arrangements for senior executives and management.Sue also advises on the incentive-related aspects of corporate transactions and has experience of private equity transactions and public company takeovers, flotations and demergers.Sue is a member of the Share Plan Lawyers Group and a member of the UK BioIndustry Association Finance and Tax Advisory Committee.

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  • 25 Nov 2025 10:42

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