PILON Calculator

What The PILON Estimate Covers

Payment in lieu of notice is a payment made instead of the employee working all or part of a notice period. This estimator focuses on the gross money calculation: salary for the notice period, eligible regular extras, agreed benefits cash value, accrued holiday, bonus additions, deductions and a rough tax-and-NI estimate. It does not decide whether a dismissal is fair, whether a PILON clause is valid, whether restrictive covenants apply, or whether a settlement agreement should be signed.

Contract wording matters. Some contracts define PILON as basic salary only. Others include benefits, allowances, commission or bonus elements. Some employers make a contractual PILON; others make a non-contractual payment with different wording. Since 2018, post-employment notice pay rules can affect tax treatment where notice is not worked. Payroll and legal advice should be used for final figures.

The calculator can help employees check a settlement schedule, and it can help employers prepare a draft estimate before payroll review. The result should be compared with the contract, notice letter, holiday record, payslip and any settlement agreement.

Notice Pay Method

The notice period is converted according to the selected unit. Months are converted as annual salary divided by 12 for the salary part. Holiday is valued on a working-day basis because holiday records are normally held in working days. If your contract uses a different method, use the basis selector and edit the inputs to match the schedule.

Worked PILON Examples

Payroll And Document Checks

When To Get Advice

Get advice before signing a settlement agreement, accepting a deduction, waiving claims, or relying on a verbal promise about tax. If employment ended in a dispute, if redundancy is involved, if restrictive covenants matter, if there is discrimination, sickness absence, whistleblowing, pregnancy or trade union context, the money calculation is only one part of the matter.

For employees, compare the estimate with the written schedule and ask payroll for the gross-to-net calculation. For employers, have payroll and legal advisers confirm the taxable amount, holiday position, benefits, deductions and settlement wording. Do not rely on the calculator for statutory deadlines or tribunal decisions.

Contract Wording To Check

Read the notice clause and the payment in lieu clause separately. The notice clause tells you how much notice should be given. The PILON clause may say what is paid when notice is not worked. It may name basic salary only, or it may mention car allowance, pension, private medical cover, commission, bonus or other benefits. If the settlement schedule uses a different wording from the contract, ask for the difference to be explained before signing.

Also check whether the termination date, last working day and payment date match the payslip. Holiday cut-off, bonus eligibility date and benefit end date can move the figures. If there is a tax estimate in the agreement, treat it as payroll’s calculation at that point, not a guarantee that HMRC will never query the treatment.