Redundancy & PILONS

louisp

Hi there
I and a number of colleagues are looking at being made redundant in the coming weeks.
We have been discussing what's potentially tax free and what is not.
We have been told by HR that any PILONS are not tax free as are in lieu of notice and therefore earnings and not part of any severance package. In that case would anyone know if you can ask your employer to pay the PILON to your pension and therefore not pay tax on it? Or is there any other way of avoiding tax payments on it?
Seems unfair that the statutory pay for people with numerous years service is so little and then they tax you on the bulk of your payment which in most cases is the PILON.
If anyone can help would be much appreciated..
Thanks

SarEl

PILON is not statutory pay - it is notice pay. Nor is it "tax-free" in the sense that you (and nearly everybody else) thinks it is. It is a tax free allowance provided that the PILON is not contractual (although there may be other reasons why an employer may have to tax it). People assume that this means they should receive the payment as a hross salary payment. That is not correct. The amount that money that you receive, provided it complies with HMRC regulations on the matter is not consdiered taxable income. But some employers always pay PILON at the net salary amount - this is a matter for them to determine. So if the PILON does not attract tax at the point of payment, there is still no obligation on the employer to pay you the gross amount.

If the employer is obligated to pay tax on PILON however, they are obliged to do so. In these circumstances it is consdiered as salary and canoot be paid as anything else.