SE12978 - Termination payments and benefits: payments in lieu of notice (PILONs): damages and agreements

Where:

• there is no entitlement or expectation to a “PILON” (see SE12976 & SE12977) and
• the employer unilaterally dismisses the employee with less notice than the employee is entitled to then

the employer has breached the contract.

A “PILON” in such circumstances represents damages for breach of contract (see SE13005) and is taxable under Section 148 ICTA 1988. The employment terminates with the employer's action.

It should be remembered that an employer would not normally breach a contract if it can be avoided due to the threat of legal action for damages. The working presumption to adopt is therefore that the employee will have been given proper notice. This presumption should be overturned only if there is evidence to support it.

PILONs may result from an agreement between employer and employee: see SE12979