Help, my employee has no Pay in Lieu of Notice clause in their contract of employment!

From time to time we see contracts of employments in use that employers have received from other HR consultancies where the clauses are inadequate.

Sadly, this will always happen where their is a tricky employment issue to resolve, it just never happens with the straightforward ones.

In a recent case, we were supporting a client with a redundancy and their notice period in their existing contract was as follows:

The client wanted the member of staff to be paid in lieu of notice (PILON) upon notice of redundancy. However there was no clauses on PILON or Garden Leave. This would therefore be a breach of contract.

If there had been a restrictive covenant or post employment covenants in place, the act of terminating the employee with pay in lieu of notice, would make any covenant null and void.

If the employer was to force the pay in lieu of notice without contractual clause then the employee could sue for breach of contract.

If an employee loses out on holiday pay accrual, company car being available, etc in order for the termination to be immediate, the employee will be much more likely want to take this matter further and they would win.

We would therefore advise that whilst agreement to pay in lieu can be sought, if not obtained then it would not be advisable to enforce.

Since 2018 all pay in lieu of notice is taxable regardless whether there is a clause or not.

If you need our help to get your contracts of employment in order, please give us a call on 01527 909436.