Can I ask for PILON?

ferry

Need some advice please..
I have been officially notified that my role is "at risk" with a projected end date of 1st July.
I have asked to be released earlier-end of April- without compromising my VR package and am now waiting to hear back on that point.
I have since been offered an opportunity to travel abroad-am I in a position to ask for PILON.

Appreciate any advice on this I'm unclear what PILON is and if it applies to me.

Thanks
F

wheels1

If you have a contractual period of notice then it is up to your employer whether they will release you from that notice period. PILON is "payment in lieu of notice".

Whether its taxable very much depends on your contract as well. If it's a VR most employers pay towards legal advice for you.

Have a look at the link below. There are plenty of excellent posts on the forum if you do a search.

Have a look at directgov website or HMRC

Uncertain

wheels1 wrote: »

If you have a contractual period of notice then it is up to your employer whether they will release you from that notice period. PILON is "payment in lieu of notice".

Whether its taxable very much depends on your contract as well. If it's a VR most employers pay towards legal advice for you.

Have a look at the link below. There are plenty of excellent posts on the forum if you do a search.

Have a look at directgov website or HMRC

As Wheels says you can ask.........

Regarding tax, PILON is taxable just as you would be if you worked your notice. It is only the redundancy pay (or compensation) that is tax free under most circumstances and up to a certain limit.

Basically anything your contract entitles you to is taxable. If your contract require say three months notice you and your employer may agree to two months PILON instead they would save money and you would save two months work. Arguably HMRC may want a further month's tax out of you as you have received a taxable benefit. You would need professional advice about this.

It is normal for any compromise agreement / redundancy package to make you responsible for any tax that is later found to be due so take care.

anamenottaken

Uncertain wrote: »

As Wheels says you can ask.........

Regarding tax, PILON is taxable just as you would be if you worked your notice. It is only the redundancy pay (or compensation) that is tax free under most circumstances and up to a certain limit.

PILON is taxable if it (PILON) is paid because it (PILON) is allowed under the contract. If the contract is silent on the matter it can be argued that there is no contractual right to it and therefore it is not taxable. The water gets muddied a bit because custom & practice may indicate that it is part of the (unwritten) contract.

Basically anything your contract entitles you to is taxable. If your contract require say three months notice you and your employer may agree to two months PILON instead they would save money and you would save two months work. Arguably HMRC may want a further month's tax out of you as you have received a taxable benefit. You would need professional advice about this.

If only two months PILON were paid but three months notice were due (and none worked), then they have not properly paid PILON. The N should be 3 months, not two.

What "taxable benefit" are you thinking about here? And what do you mean by "a further month's tax"?

It is normal for any compromise agreement / redundancy package to make you responsible for any tax that is later found to be due so take care.

,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

Uncertain

Regarding anamenottaken's three comments in red....

1. Yes and No! Technically PILON is a breach of contract unless the employment contract reserves the right to pay it. However there is always a right to notice so, in my understanding, replacing the notice with PILON does not get round the tax liability.

2 & 3. I was assuming the employer and employee AGREED to two months PILON rather than three months worked as both parties preferred this compromise. When dealing with a similar situation I was advised (maybe wrongly but I don't think so) that, as there was a contractual right to 3 months notice HMRC would require this amount of tax. The general principle being you can't avoid tax by paying less notice that required balanced by extra compensation or redundancy?

Maybe I was advised badly?

dampsquib

ferry wrote: »

Need some advice please..
I have been officially notified that my role is "at risk" with a projected end date of 1st July.
I have asked to be released earlier-end of April- without compromising my VR package and am now waiting to hear back on that point.
I have since been offered an opportunity to travel abroad-am I in a position to ask for PILON.

Appreciate any advice on this I'm unclear what PILON is and if it applies to me.

Thanks
F

As you have been notified that you are "at risk", you are currently heading towards Compulsory Redundancy (CR). When you say 1st July is the "projected end date", is this end date of the "at risk" period when you will be given the final decision (which is almost certainly that you are going to be made redundant), or are you expecting the CR decision earlier, and 1st July is to be your last day at work (after working your notice)?
To be clear, you are not currently working any notice to which you are entitled - a notice period would begin when CR is confirmed.
It seems you must have the opportunity to volunteer for VR? Going under VR might mean that your compensation entitlement/offer terms could be different, and it could also change your entitlement to notice. It would be useful if you could clarify what type of employment you are in. If you are a Civil Servant, under VR, you probably aren't entitled to any Notice, whereas, if you are in the private sector, you may have a contractual right to notice, or at least be entitled to the minimum specified by legislation. If the latter, legislation does allow the party on the receiving end of the notice, to waive their right to notice.
Once redundancy has been confirmed, it is quite common for employers not to want to want staff to actually work their notice, so will send them on their way with a PILON (Payment In Lieu Of Notice).
Sometimes, where an employer doesn't even want staff on the premises, before redundancy has been confirmed, they send then on, what's commonly known as, "gardening leave". This could be something else to explore with your employer if they didn't need any more work out of you.

getmore4less

Uncertain wrote: »

Regarding anamenottaken's three comments in red....

1. Yes and No! Technically PILON is a breach of contract unless the employment contract reserves the right to pay it. However there is always a right to notice so, in my understanding, replacing the notice with PILON does not get round the tax liability.

2 & 3. I was assuming the employer and employee AGREED to two months PILON rather than three months worked as both parties preferred this compromise. When dealing with a similar situation I was advised (maybe wrongly but I don't think so) that, as there was a contractual right to 3 months notice HMRC would require this amount of tax. The general principle being you can't avoid tax by paying less notice that required balanced by extra compensation or redundancy?

Maybe I was advised badly?

If the policy is PILON payments at terminantion one way round this is to "work" notice, in most cases people don't leave immediately so you can work some/all of our notice and have your package increased.

If the package was over £30k anyway then this only matters if the extra would take you into the 40% bracket. probbly saves NIC for the employer as well.