Calculate pay in lieu of notice and garden leave entitlement
Garden Leave & PILON Calculator
Garden Leave vs Pay in Lieu of Notice
Garden leave: You remain employed but are excluded from work. You continue to receive salary and benefits. Post-termination restrictions (PTRs/non-competes) run from the end of employment, not the start of garden leave.
PILON (Pay in Lieu of Notice): Employment ends immediately and a lump sum is paid instead of serving notice. Since April 2018, PILON is always taxed as employment income — the old tax-free element has been removed.
Frequently Asked Questions
Is PILON still tax-free?
No. Since April 2018, all PILON is subject to income tax and NIC, regardless of whether there is a contractual PILON clause. The old 'ex gratia' tax-free PILON treatment was abolished.
Can an employer force you onto garden leave?
Yes, if the employment contract contains a garden leave clause. Without such a clause, forcing garden leave could be constructive dismissal. Check your contract.
Does garden leave count towards employment length?
Yes — you remain employed during garden leave, so service length continues to accrue. This is relevant for redundancy statutory notice periods and redundancy pay calculations.
Can I work for another employer during garden leave?
Generally no — garden leave typically restricts you from starting new employment or working for a competitor. Check your specific garden leave terms.
What is the minimum notice period by law?
Statutory minimum: 1 week after 1 month's service, then 1 week per year of service up to a maximum of 12 weeks. Your contractual notice period may be longer.
What happens to pension contributions during garden leave?
Employer and employee pension contributions continue during garden leave as normal employment terms apply. Check whether bonus or commission is included.
Can I use annual leave during garden leave?
Employers can direct employees to take unused annual leave during garden leave. This allows leave to be 'used up' during the notice period without additional payment.
What is a restrictive covenant?
A post-termination restriction limiting competition, client solicitation, or staff poaching. Garden leave delays when PTRs start — the longer the garden leave, the less time the covenant can be enforced.
Is there a difference between notice period and garden leave period?
Garden leave IS the notice period — the employee is still employed during garden leave but not required to attend work. The distinction is they can't work elsewhere due to their continued employment status.
Can I negotiate PILON vs garden leave?
Yes — in many cases employers prefer PILON (cleaner break) and employees may prefer garden leave (continued benefits, time to search). Terms are often negotiated as part of a settlement agreement.
What is payment in lieu of holidays on termination?
On termination, any accrued but untaken holiday must be paid out in cash at the normal daily rate. This is separate from PILON and is treated as earnings (subject to PAYE and NIC).
How is PILON calculated if salary varies?
Under the post-2018 rules, PILON is based on 'post-employment notice pay' (PENP). Complex calculations apply for those with variable pay — HMRC's online guidance provides the PENP formula.
