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Is PAY-IN-LIEU of Notice pensionable by default

Need to pay an employee 3mths notice (PILN)

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is this pay element suject to respective employee and employer pension deductions/contributions by default or is it subject to contractual conditions as with benefits in kind where, if an employee works out their notice then normal benefits apply; but they do not, benefits can be withheld.

I've tried asking the Pension Regulator but they answer was a non-answer and very grey.


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10th Jun 2019 15:19

The reason you are making the PILON is that you have breached the contract of employment by terminating it without the required notice. The payment is to compensate the (former) employee for the loss resulting from the breach.

Sometimes employment contracts explicity provide for termination without notice. Unless otherwise specified, the employee is due the value of the pension contributions and all other benefits.

There is some general guidance about PILON from ACAS here:

So to answer the question – it depends on the employment contract. But if it doesn’t say anything, pension contributions should still be made.

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10th Jun 2019 16:27

Many thanks - in response to your closing point, the contract states that if they work the notice period, all benefits are paid as normal. However if the notice period is not worked, then the benefits stop on the last day of attendance. It's this point which has raised the pension query.

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to Mount_Gay
10th Jun 2019 17:00

If the contract explicitly states that benefits cease on the last day, that does suggest that the pension also stops.

I'm not a lawyer and obviously don't have sight of the contract. That said, my suggestion would be not to account for pension contributions but be prepared to pay them if the employee pushes back. It's unlikely to be worth incurring a lot of fees to defend a relatively small amount.

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