Notice and Payment in Lieu of Notice (PILON)

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What is Notice?

Notice is basically receiving a heads up from your employer about when your employment contract will end. You also owe your employer a duty to give notice if you are leaving the job. Neither you or your employer have a choice as to the minimum amount of notice to give because it is written in law. As an employee, you have the benefit of two types of notice rights. Statutory notice which is set out in the Employment Rights Act 1996 (ERA 1996) and contractual notice which is set out in your employment contract. If your employer does not give you notice or pay you for your notice period you will have a claim for breach of contract. 

Statutory Minimum Notice

Section 86 of the Employment Rights Act 1996 (ERA 1996) sets the minimum notice that you and your employer must give each other in order to end the employment contract.  This applies with the exception of situations where your employers conduct forces you to walk out of the job without notice (constructive dismissal) or where your conduct forces your employer to dismiss you without notice(summary dismissal). Overseas employees, some types of merchant seamen, armed forces, crown employees and parliamentary staff are excluded from the right to statutory notice.

The statutory minimum notice period is;

• no minimum in the first month of employment
• one week after continuous service between one month and two years
• one week for each complete year of continuous service for service between two years and twelve years
• 12 weeks after twelve or more years’ continuous service

Under s86(3) ERA 1996 you and your employer can agree to waive your rights to statutory minimum notice, or agree to a payment in lieu of notice. Statutory notice is implied into the employment contract, and so if either you or your employer do not give the required notice there would be a claim for breach of contract.

Contractual Notice

Contractual notice is the amount of notice that your employer can set out in your terms and conditions of employment. It can be longer than statutory notice. As an example the statutory notice you must give your employer is one week, but your employer can increase notice to one month in your terms and conditions of employment. 

Payment in lieu of Notice (PILON)

You can waive your right to the statutory minimum notice in s86 ERA 1996 or contractual notice and accept payment for the notice period. This means you leave the workplace immediately but are paid as if you were at work for the period when you would have been working out your notice. This is called payment in lieu of notice. If you are not paid for the notice period, you will have a claim for breach of contract in the employment tribunal. You must first go through free ACAS Early Conciliation.

Wrongful dismissal and PILON

If your contract states that you are entitled to a payment in lieu of notice on termination, any dismissal without adequate notice will not be wrongful even if your employer does not make the payment in lieu of notice - Abrahams v Performing Right Society Ltd [1995]

This means that your employment contract has been lawfully terminated and so you cannot make a claim for wrongful dismissal. Instead you should make a debt claim for the notice pay and other benefits due under the contract. It also means that you do not have to mitigate your loss or give credit for earnings from other employment during the notice period.