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Settlement Agreements – What is a Payment in Lieu of Notice? (Part 3)

A photo of Noel McNicholas
20th February 2023

A settlement agreement with a payment in lieu of notice (PILON) is a legal agreement between an employer and an employee that outlines the terms of the employee's departure from the company.

The PILON clause allows the employer to pay the employee their notice period in one lump sum, rather than requiring them to work through the notice period. This type of agreement is typically used when an employee is being terminated or is leaving the company voluntarily. The PILON clause can also be included in an employment contract and will typically state the amount of notice (e.g. 1 week, 1 month, 3 months and so on) that the employee is entitled to and the amount that will be paid in lieu of notice.

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If you have any questions concerning a settlement agreement, whether you are an Employer or Employee, please contact Noel McNicholas on 01926 887700 or