NIM02560 - Class 1 NICs: Earnings of employees and office holders: Payments made on termination of employment: Payments in lieu of notice (PILONs): 'Gardening leave'

»Ê¹ÚÌåÓýapp ‘gardening leaveâ€� scenario is one in which an employer:

  • gives the required period of notice in accordance with the terms of the contract,
  • makes a lump sum payment of the earnings to which the employee would be entitled if they had worked this period, and
  • tells the employee not to turn up for work during the notice period.

»Ê¹ÚÌåÓýapp contract does not terminate until the notice period expires. »Ê¹ÚÌåÓýappre has not been a breach of the contract of employment because the necessary notice of termination of the employment has been given, and the employee is therefore not entitled to compensation. »Ê¹ÚÌåÓýapp employer is not actually making payment of a PILON in these circumstances and is rather making a payment of the earnings due under the contract in a lump sum. Such a payment is earnings for the purposes of NICs and is liable for Class 1 NICs in the normal way.