Pay in Lieu of Notice (PILON): What NHS Staff Are Paid When They Leave Early

Last updated: 6 November 2026 · Figures verified against the NHS Employers 2026/27 pay circular.

By the NHS Bands Pay editorial team

What PILON is

Every NHS employment contract has a notice period, and the normal way a contract ends is for the employee to work through it, paid as usual, and leave on the last day. Pay in lieu of notice changes that shape. The trust ends the employment straight away and pays the basic pay the employee would have earned during the notice period, as a lump sum, instead of keeping them on the books for those weeks or months. The letters stand for pay in lieu of notice, and the payment is usually shortened to PILON in HR letters, payslips and settlement paperwork.

The maths is simple, and that is part of the appeal for both sides. PILON is basic pay for the contractual notice period, nothing else. For a one-month notice period it is the annual salary divided by 12. For a three-month notice period it is the annual salary divided by 4. A Band 5 nurse on the entry point of £32,073 receives £2,672.75 for one month of notice. A Band 8a manager on the top point of £64,750 receives £16,187.50 for three months. There is no negotiation about the rate, because the rate is the salary, and the only question is how long the notice period is. The table in the next sections gives the figures for the bands most readers sit at, and the worked examples show the full calculation for four different leavers.

Three points about the definition are easy to get wrong, so they belong here rather than buried in a FAQ. First, PILON is basic pay only. Unsocial-hours enhancements, overtime, London weighting and other allowances are not included, because the payment replaces basic pay for a period that was never worked, and the enhancements are paid on hours actually worked. Second, PILON is not redundancy pay. Redundancy pay is a separate statutory and contractual entitlement with its own rules, and it can be paid on top of PILON where a redundancy applies. Third, PILON is not a settlement payment. A settlement or compromise agreement may include a PILON element, but the settlement itself is a separate document with its own terms, and the PILON element inside it is taxed in the same way as a standalone PILON.

The reason PILON exists is practical. A trust may want a clean break on the day a contract ends, rather than weeks of a member of staff working out notice in a team they are leaving, or in a role that has already been handed over. A senior manager leaving after a restructure, a member of staff dismissed for capability or conduct, or a fixed-term post ending early are the situations where PILON appears most often. For the employee, the attraction is the money at once and a clear end date. For the trust, the attraction is certainty: one payment, one leaving date, and no further management of the notice period. The rest of this page is about making sure that certainty is priced correctly, because a PILON that is worked out on the wrong notice period, or taxed on the wrong basis, is a mistake that is hard to fix after the money has been paid.

When PILON is paid, and when it is not

PILON is not an automatic right for either side. The employer can only pay in lieu of notice if the contract of employment contains a PILON clause that reserves that right, and if the contract has no such clause, the employer must either let the employee work the notice or reach an agreement with them. The same applies in reverse: an employee cannot demand PILON instead of working their notice unless the contract gives them that option. Before you assume PILON will be offered, or that you can insist on it, read your contract of employment and any trust policy that applies to your role. The clause is usually a single sentence in the termination section, and it is the sentence that decides everything else on this page.

Where a PILON clause exists, the trust may use it in several situations. Dismissal is the most common: where a member of staff is dismissed with notice, the trust can end the employment on the day of the decision and pay the notice period as PILON, rather than keeping the person in post for the notice period. A fixed-term contract ending early can also be settled by PILON, paying the balance of the notice that would have applied. Redundancy is different: PILON can be paid alongside redundancy pay, but the redundancy payment itself is a separate entitlement, and the two must not be confused, because they are taxed differently, as the tax section explains.

PILON does not apply automatically on voluntary resignation. If you resign and your contract has a PILON clause, the trust may choose to pay you in lieu, but it is the trust's choice, not yours, and many trusts will instead ask you to work the notice, particularly where a handover is needed. If your contract has no PILON clause and you resign, you work the notice, unless you and the trust agree otherwise. A negotiated early release, where you ask to leave before the notice is up and the trust agrees, is not PILON in the strict sense, although the money may look the same on the payslip, and the tax treatment is the same either way, because the payment still represents basic pay for an unworked notice period.

There are also situations where PILON never arises at all. Summary dismissal for gross misconduct carries no notice, so there is no notice pay to replace. A contract that ends by mutual agreement on a fixed date, with no notice period running, has no PILON element. And a settlement agreement that pays an ex gratia sum without any notice element is a different payment entirely, even if the total looks like a few months of pay. The question to ask in every case is simple: does this payment represent basic pay for a notice period that was not worked? If the answer is yes, it is PILON, and the tax section of this page applies. If the answer is no, it is something else, and it may be taxed differently.

How much PILON is: the 2026/27 table

The table below gives the PILON for the bands most readers sit at, in England in 2026/27, full-time on a 37.5-hour week. The one-month column is the annual salary divided by 12, and the three-month column is the annual salary divided by 4. Find your band and your pay point, then read across to the column that matches your notice period. Part-time staff are paid pro rata: multiply the full-time figure by your whole-time-equivalent fraction, so a 0.6 whole-time-equivalent Band 5 nurse on the entry point receives 60% of £2,672.75, which is £1,603.65, for one month of notice.

The table also shows why the notice period matters as much as the salary. A Band 5 nurse on the top point receives £3,253.58 for one month of notice and £9,760.75 for three months, a difference of £6,507.17, and a Band 7 nurse on the top point receives £4,709.58 for one month against £14,128.75 for three months. The gap between one month and three months is the whole reason the notice period is worth checking in the contract before you accept a figure. If your contract gives you three months and the trust offers one, the shortfall at Band 7 top is £9,419.17, and no amount of goodwill makes up for a figure worked from the wrong period.

Two details in the table deserve a note. The Band 5 entry point is the figure for a newly qualified nurse, midwife or allied health professional, and the Band 5 top point is the figure after three years in post, so the two rows cover the whole of the first band most readers sit in. The Band 9 top point, £129,783, produces a one-month PILON of £10,815.25, which is more than a Band 5 nurse earns in four months, and that is the scale of the difference the band makes. The Agenda for Change guide sets out the full qualified scales behind these figures, and the band pages, starting with Band 5 pay, Band 6 pay and Band 7 pay, explain what the roles at each band involve.

Worked examples: four leavers

The examples below use 2026/27 England rates, full-time, and each one shows the annual salary, the notice period, and the PILON that follows from it. The maths is annual salary divided by 12 for one month, and annual salary divided by 4 for three months, and every figure is taken from the verified pay data for 2026/27.

Example 1: Band 5 staff nurse, entry point, one month of notice. The nurse is on the Band 5 entry point of £32,073 and the contract gives one month of notice. One month of PILON is £32,073 divided by 12, which is £2,672.75. That is the whole of the PILON. If the nurse is part-time on a 0.6 whole-time-equivalent contract, the figure is 60% of £2,672.75, which is £1,603.65. Payment for untaken annual leave is added separately, as the final pay section explains, and the tax on the £2,672.75 is worked through in the tax section below.

Example 2: Band 6 senior nurse, top point, two months of notice under a one, two, three month trust policy. Some trusts use a one, two, three month split instead of the usual one month for Bands 1 to 7 and three months for Bands 8 to 9, giving Bands 5 to 7 two months of notice. A Band 6 nurse on the top point of £48,117 with two months of notice receives £48,117 divided by 12 and multiplied by 2, which is £8,019.50. The same calculation for a Band 5 nurse on the top point of £39,043 gives £6,507.17 for two months. The two-month figure is worth knowing, because a trust that uses the one, two, three month split pays a Band 6 nurse £4,009.75 more than the one-month figure, and a reader who assumes one month will understate their entitlement by exactly that amount.

Example 3: Band 8a service manager, top point, three months of notice. The manager is on the Band 8a top point of £64,750 and the contract gives three months of notice, which is the usual convention for Bands 8 to 9. Three months of PILON is £64,750 divided by 4, which is £16,187.50. That is the gross figure, before tax, National Insurance and any student loan deduction, and the tax section works through what is kept from it. The one-month equivalent is £5,395.83, which is the figure that would apply if the same manager had only one month of notice, and the difference between the two, £10,791.67, is the value of the longer notice period.

Example 4: Band 9 director, top point, three months of notice. The director is on the Band 9 top point of £129,783 and the contract gives three months of notice. Three months of PILON is £129,783 divided by 4, which is £32,445.75. The one-month equivalent is £10,815.25. At this level the tax treatment matters more than the gross figure, because the whole of the PILON falls above the £50,270 higher-rate threshold and is taxed at 40%, with National Insurance at 2% above that threshold, so the amount kept is a much smaller share of the gross than it is for a Band 5 nurse. The tax section works through the Band 8a example in full, and the same method applies here.

Notice periods: the convention by band and nation

There is no national Agenda for Change table of notice periods by band and service. Handbook paragraph 19.2 leaves notice periods, where they differ from the statutory minimums, to local agreement, which means the contract and the trust policy decide, not a national rule. That is the single most important fact on this page, because it means no table can give you your notice period: it can only give you the convention, and you must check it against your own contract.

The typical convention in most English trusts is one month for Bands 1 to 7 and three months for Bands 8 to 9. Wales usually counts notice in weeks rather than months: four weeks for Bands 1 to 6, eight weeks for Band 7 and twelve weeks for Bands 8 to 9. Scotland is usually one month for Bands 2 to 7 and three months for Band 8a and above. Some trusts use a one, two, three month split instead: one month for Bands 1 to 4, two months for Bands 5 to 7 and three months for Bands 8 to 9, and one trust policy, CPFT policy version 5.1 from December 2025, is published in exactly that form. The notice periods by band guide sets out the convention in full, including the trust variations, and it is the page to read alongside this one.

The difference between counting in months and counting in weeks is worth spelling out, because it changes the money. In England, three months of PILON for a Band 8a manager on the top point of £64,750 is £64,750 divided by 4, which is £16,187.50. In Wales, twelve weeks of PILON for the same manager is £64,750 divided by 52.2 and multiplied by 12, which is £14,885.06. The gap is £1,302.44, and it exists because a calendar quarter is slightly longer than twelve weeks: 52.2 weeks divided by 4 is 13.05 weeks, not 12. A Band 5 nurse on the entry point in Wales, on four weeks of notice, receives £32,073 divided by 52.2 and multiplied by 4, which is £2,457.70, against £2,672.75 for one month in England, a difference of £215.05. A Band 7 nurse on the top point in Wales, on eight weeks of notice, receives £56,515 divided by 52.2 and multiplied by 8, which is £8,661.30. None of these figures is wrong: they follow from the way the notice period is counted, and the contract tells you which way applies.

Under all of the conventions sits the statutory floor, set by the Employment Rights Act 1996 section 86. When you resign, you must give at least one week's notice after one month of service. When the employer ends the employment, the minimum is one week after one month of service, then one week for each complete year of service from two years, capped at twelve weeks. A Band 5 nurse on the entry point of £32,073 who resigns after one month of service owes one week of notice, worth £614.43 if it were paid in lieu. The same nurse dismissed after five years of service is owed five weeks of notice as a minimum, worth £3,072.13, and a Band 5 nurse on the top point of £39,043 dismissed after twelve or more years of service is owed the twelve-week cap, worth £8,975.40. The statutory minimum is a floor, not the figure itself: the contract almost always gives more, and the contractual period is the one that decides the PILON.

Tax: PENP, the £30,000 exemption and take-home

The tax treatment of PILON changed in April 2018, and the old idea that termination payments are tax-free up to £30,000 no longer applies to the notice-pay element. The part of a termination payment that represents basic pay for the unworked notice period is called Post-Employment Notice Pay, shortened to PENP, and it is taxed as earnings through PAYE, with National Insurance and student loan deductions on top. The first £30,000 tax-free exemption for termination payments does not apply to the notice-pay element. It can still apply to a separate genuine termination payment, such as redundancy pay or an ex gratia sum in a settlement, but the PILON itself is always taxed as normal pay.

The distinction matters in practice, because a leaving package often contains more than one element, and each element is taxed on its own basis. A member of staff made redundant might receive PILON of £9,760.75, for three months at the Band 5 top point, plus statutory redundancy pay, plus an ex gratia sum. The PILON is taxed in full as earnings. The redundancy pay and the ex gratia sum can use the £30,000 exemption, so the first £30,000 of those elements combined is tax-free. If the payslip or the settlement letter lumps the elements together, ask for them to be split out, because the split decides the tax, and a PILON that is wrongly treated as tax-free will be caught by HMRC and taxed later, with interest.

Two worked examples show what is kept from a PILON after tax, National Insurance and student loan. Both use 2026/27 rates: the personal allowance is £12,570 a year, income tax is 20% on income above the allowance up to £50,270 and 40% above that, employee National Insurance is 8% on earnings above £12,570 up to £50,270 and 2% above that, and Plan 2 student loan is 9% of earnings above £29,385. Both examples are simplified: they assume the PILON is the only pay in that month and that the reader is in the stated tax band, because the actual tax depends on how much has already been earned in the tax year. If the PILON lands in the same month as a final salary payment, more of it may be taxed at 40% than these examples show.

Example A: Band 5 top point, one month of PILON, basic rate. The PILON is £3,253.58. Tax at 20% is £650.72. National Insurance is 8% of the amount above the monthly primary threshold of £1,047.50, which is £12,570 divided by 12, so 8% of £2,206.08 is £176.49. Plan 2 student loan is 9% of the amount above the monthly threshold of £2,448.75, which is £29,385 divided by 12, so 9% of £804.83 is £72.43. The amount kept, before any pension deduction, is £2,353.94. The pension treatment of PILON is not settled in the published rules, so no pension deduction is included in this example: check your final payslip, as the next section explains, and if a pension contribution was deducted, the amount kept will be lower.

Example B: Band 8a top point, three months of PILON, higher rate. The PILON is £16,187.50. The manager is already a higher-rate taxpayer, because the salary of £64,750 sits above the £50,270 threshold, so the whole of the PILON is taxed at 40%, which is £6,475.00. National Insurance is 8% on the slice between the monthly primary threshold of £1,047.50 and the monthly upper earnings limit of £4,189.17, which is £50,270 divided by 12, giving £251.33, plus 2% on the rest of the payment above £4,189.17, giving £239.97, for a total of £491.30. The amount kept is £9,221.20. The same method applies to the Band 9 example: £32,445.75 taxed at 40% is £12,978.30, and the National Insurance follows the same two-rate split.

One more tax point belongs here. PILON is paid through payroll, so it appears on the payslip and on the P45, and it counts as earnings for the tax year in which it is paid. If the PILON pushes the total for the year above £100,000, the personal allowance starts to taper, falling by £1 for every £2 above £100,000 and reaching zero at £125,140, which can make the effective tax rate on the top slice of the payment 60%. That is most likely to bite at Band 8c and above, and for consultants, and the tax code guide explains how to spot a reduced allowance on the payslip. If the PILON is paid in a different tax year from the final salary, the tax year it falls in is the one that decides the rate, so the timing of the payment is worth checking with payroll.

Pension and the leaving date

The pension treatment of PILON is the one part of this page where the published rules do not give a clear answer, and the honest position is to say so. One payroll source says no pension deductions are taken from PILON, but that is not an NHSBSA rule, and practice varies between trusts. The safe course is to check your final payslip: if a pension contribution was deducted from the PILON, the payment counted as pensionable pay for that month; if it was not, it did not. Ask payroll directly if the payslip is not clear, and keep the payslip, because it is the record of what was actually done. Do not assume either way, and do not let anyone tell you the position is settled when the published guidance does not settle it.

What is certain is the leaving date. For pay, leave and pension purposes, the leaving date is the date the notice period would have ended, not the last day you attended work. A Band 5 nurse with one month of notice whose employment ends on 15 November, with the notice period running to 15 December, has a leaving date of 15 December. Service up to that date counts for pension purposes, annual leave accrues up to that date, and the pension record shows the leaving date as 15 December. That matters for the pension, because a few extra weeks of pensionable service can change the tier, the leaving date on the record, and the date from which a deferred pension is calculated. The guide to your pension when you leave the NHS explains refunds, deferred benefits and transfers in full, and the pension contributions guide sets out the 2026/27 tiers, which run from 5.2% on pay up to £13,259 to 12.5% above £67,669, with the employer paying 23.7% on top.

The leaving date also matters for continuous service. Service is continuous up to the end of the notice period, so a member of staff who moves straight to another NHS trust after a PILON keeps their continuous service unbroken, and the leave tier, sick pay entitlement and redundancy reckoning that depend on continuous service are protected. The gap between the last working day and the leaving date is not a break in service, and a new employer that treats it as one is wrong. Keep the letter that states the leaving date, because it is the document that proves the service was continuous, and it is the document payroll will ask for if the record is queried.

PILON compared with garden leave, redundancy and settlement

PILON is one of four ways a contract can end with money changing hands, and the four are often confused, because the totals can look similar. Garden leave keeps you employed for the whole notice period: you are paid as normal each month, your pension contributions continue, and your annual leave keeps accruing, but you do not attend work. PILON ends the employment immediately and pays the notice pay as a lump sum, so there is no further pay, no further leave accrual and no further pensionable service after the leaving date. Garden leave keeps you on the books, which matters if you need a reference, a continuity of service record or a few more weeks of pensionable service. PILON closes the employment at once, which suits an employer that wants a clean break. Which one applies depends on the contract, and some contracts allow both, with the trust choosing.

Redundancy pay is different again. It is paid where a post is redundant, under the statutory scheme and the Agenda for Change redundancy terms, and it is calculated from age, length of service and weekly pay, not from the notice period. PILON can be paid alongside redundancy pay, and the two are taxed differently: the PILON is taxed in full as earnings, while the redundancy pay can use the £30,000 exemption. A member of staff who is made redundant should see both items separately on the paperwork, and if they are lumped together, ask for the split. The redundancy pay guide sets out the calculation in full, including the weekly pay cap and the service bands.

A settlement agreement, sometimes called a compromise agreement, is a negotiated exit on agreed terms, and it usually includes an ex gratia sum on top of any notice pay. The ex gratia element can use the £30,000 exemption, while the PILON element inside the same agreement is taxed as earnings, so the split in the agreement is not a formality: it decides the tax. Settlement agreements also commonly include an agreed reference, a confidentiality clause and a waiver of claims, and they should be checked by an independent adviser before signing, because the waiver is binding. A mutually agreed resignation scheme, known as MARS, is a separate national framework used during restructures, and it is not the same as a settlement agreement or a redundancy, although the money can look similar. The pay protection guide is the page to read if the exit follows a downgrading or redeployment rather than a redundancy, because protection and PILON can interact in ways that are easy to miss.

The practical question is which of the four you are being offered, and the answer is in the paperwork, not in the total. Ask for the leaving letter to state, in writing, the leaving date, the PILON amount and how it was worked out, the tax treatment applied to each element, the position on annual leave, and the position on pension. If the letter does not split the elements, ask for a revised letter that does. A trust that cannot split them is a trust whose payroll has not yet worked out the tax, and that is a problem to solve before the money is paid, not after.

Untaken leave and the final pay calculation

PILON does not include payment for untaken annual leave. That is a separate item on the final pay calculation, and it is worked out from the leave entitlement up to the leaving date, which is the date the notice period would have ended. Agenda for Change gives 27 days of annual leave plus 8 bank holidays at up to 4 years of service, 29 days plus 8 at 5 years, and 33 days plus 8 at 10 years, on a 7.5-hour day, and a standard NHS day is 7.5 hours. Leave that would have accrued during the notice period is included in the calculation, because the entitlement runs to the leaving date, and any untaken leave up to that date is paid separately, at the daily rate, which is the annual salary divided by 365 for a calendar-day calculation, or divided by the working days in the year where the trust uses that basis. If you have taken more leave than you have accrued by the leaving date, the excess is normally deducted from the final pay.

The final pay calculation, then, has four parts: the PILON itself, payment for untaken annual leave, any salary owed up to the last working day, and any other contractual payments such as redundancy pay or an ex gratia sum, each taxed on its own basis. The final pay guide works through the whole calculation, including the daily-rate maths and the pension refund position for short service, and the annual leave guide sets out the tiers in full. The payslip guide explains how to read each line once the final payslip arrives, and the first check is that the PILON appears as its own line, separate from the leave payment and separate from any redundancy or ex gratia sum, because the split is what proves the tax was worked out correctly.

A career break is a different situation, and it is worth distinguishing here, because staff on a break sometimes confuse the two. A career break is a formal break of up to five years, agreed in advance, with the employment continuing in a suspended form, and the career break guide sets out the pay, pension and return rights. PILON is an ending, not a pause, and there is no return right. If you are being offered PILON, you are leaving, and the question is the terms, not the timing of a return.

What to check before you accept PILON

Five checks cover most of the risk, and they take an afternoon. First, read your contract and find the PILON clause, and confirm the notice period it gives you. If the contract has no PILON clause, the trust cannot impose PILON, and any early release is a negotiated exit, which should be agreed in writing. Second, work out the amount yourself from the table on this page, using your band, your pay point and your notice period, and compare it with the figure the trust has offered. If the two do not match, ask for the working out in writing, because the difference is usually the notice period, the pay point, or a part-time fraction that has been applied twice.

Third, ask for the elements to be split in writing: the PILON, the leave payment, any redundancy pay and any ex gratia sum, each on its own line, with the tax treatment stated for each. Fourth, check the leaving date, and confirm it is the date the notice period would have ended, not the last day you attended work, because the leaving date decides the leave accrual, the pension record and the continuity of service. Fifth, check the final payslip line by line when it arrives, using the payslip guide, and keep it, because it is the record of what was actually paid and taxed, and it is the document you will need if HMRC or the pension scheme queries anything later.

One last point, for staff who are leaving to take another NHS post. A PILON does not break continuous service, because the leaving date runs to the end of the notice period, and the new trust should count the service as continuous from the leaving date. Tell the new employer the leaving date, not the last working day, and give them the letter that states it, so the leave tier and the sick pay entitlement carry across correctly. The money is only half the story: the dates on the record decide the entitlements that follow you into the next post, and they are worth getting right.

Frequently asked questions

What is pay in lieu of notice (PILON)?

Pay in lieu of notice, usually shortened to PILON, is a payment made instead of working out a notice period. When a contract ends, the employee would normally work through their notice and be paid as usual. Under a PILON clause the trust ends the employment straight away and pays the basic pay the employee would have earned during the notice period, as a lump sum. The payment is basic pay only, worked from the annual salary for the contractual notice period, and it is taxed as normal pay. It is not redundancy pay, it is not a settlement payment, and it does not apply automatically: the contract must reserve the right to pay in lieu, and the leaving date for pay, leave and pension purposes is the date the notice period would have ended.

How is PILON calculated?

PILON is basic pay for the contractual notice period, nothing else. For a one-month notice period it is the annual salary divided by 12: a Band 5 nurse on the entry point of £32,073 receives £2,672.75, and a Band 5 nurse on the top point of £39,043 receives £3,253.58. For a three-month notice period it is the annual salary divided by 4: a Band 8a manager on the top point of £64,750 receives £16,187.50, and a Band 9 director on £129,783 receives £32,445.75. Notice periods are usually counted in calendar months in England, so use annual divided by 12 for one month and annual divided by 4 for three months. In Wales notice is usually counted in weeks, so the maths is annual divided by 52.2 multiplied by the number of weeks: four weeks for a Band 5 entry point is £2,457.70. Unsocial-hours enhancements, overtime, London weighting and allowances are not included, because PILON is basic pay only.

Is PILON taxed?

Yes, and it is taxed as normal pay, not as a tax-free termination payment. Since April 2018 the part of a termination payment that represents basic pay for the unworked notice period, known as Post-Employment Notice Pay, is taxed as earnings through PAYE, with National Insurance and student loan deductions on top. The first £30,000 tax-free exemption for termination payments does not apply to the notice-pay element. That exemption can still apply to a separate genuine termination payment, such as redundancy pay or an ex gratia sum in a settlement, but the PILON itself is always taxed. A Band 5 nurse on the top point receiving one month of PILON, £3,253.58, as a basic-rate taxpayer, pays £650.72 in tax, £176.49 in National Insurance and £72.43 in Plan 2 student loan deductions, keeping £2,353.94 before any pension deduction, and the pension treatment of PILON varies, so check your final payslip. The worked examples on this page show the maths in full.

Do I get pension on PILON?

That is not settled in the published NHS pension rules, and this page does not assert an answer. One payroll source says no pension deductions are taken from PILON, but that is not an NHSBSA rule, and practice varies between trusts. The safe course is to check your final payslip: if a pension contribution was deducted from the PILON, the payment counted as pensionable pay for that month; if it was not, it did not. Ask payroll directly if the payslip is not clear, and keep the payslip, because it is the record of what was actually done. What is certain is that your pension record uses the leaving date as the end of the notice period, not the last day you attended work, so service up to the end of the notice period counts. The guide to your pension when you leave the NHS explains refunds, deferred benefits and transfers in full.

Can my employer force me to take PILON?

Only if your contract allows it. PILON is not an automatic right for either side. The employer can only pay in lieu of notice if the contract contains a PILON clause reserving that right, and if it does not, the employer must either let you work the notice or reach an agreement with you. The same applies in reverse: you cannot demand PILON instead of working your notice unless the contract gives you that option. Check your contract of employment and any trust policy that applies to your role before you assume PILON will be offered. If your contract has no PILON clause and the trust still wants you to leave immediately, that is a negotiated exit, and you should ask for the terms in writing, including the leaving date, the amount, the tax treatment and the position on annual leave and pension.

What is the difference between PILON and garden leave?

Under garden leave you stay employed for the whole notice period, you are paid as normal each month, your pension contributions continue, and your annual leave keeps accruing, but you do not attend work. Under PILON your employment ends immediately and you receive the notice pay as a lump sum instead, so there is no further pay, no further leave accrual and no further pensionable service after the leaving date. Garden leave keeps you on the books, which matters if you need a reference, a continuity of service record or a few more weeks of pensionable service. PILON closes the employment at once, which suits an employer that wants a clean break. Which one applies depends on the contract: some contracts allow both, and the trust chooses. If your contract offers a choice, the garden-leave route is usually better for pension and leave, while PILON is better if you want the money at once and a clean end date.

Does PILON affect my annual leave?

PILON does not include payment for untaken annual leave: that is a separate item on the final pay calculation. Your leave entitlement runs to the leaving date, which is the date the notice period would have ended, so leave that would have accrued during the notice period is included in the calculation, and any untaken leave up to that date is paid separately, at the daily rate. Agenda for Change gives 27 days of annual leave plus 8 bank holidays at up to 4 years of service, 29 days plus 8 at 5 years, and 33 days plus 8 at 10 years, on a 7.5-hour day. If you have taken more leave than you have accrued by the leaving date, the excess is normally deducted from the final pay. The annual leave guide sets out the tiers in full, and the final pay guide works through the whole leaving calculation, including the leave element.

What notice period applies in my trust?

There is no national Agenda for Change table of notice periods by band and service: Handbook paragraph 19.2 leaves notice periods, where they differ from the statutory minimums, to local agreement. The typical convention in most English trusts is one month for Bands 1 to 7 and three months for Bands 8 to 9. Wales usually counts notice in weeks: four weeks for Bands 1 to 6, eight weeks for Band 7 and twelve weeks for Bands 8 to 9. Scotland is usually one month for Bands 2 to 7 and three months for Band 8a and above. Some trusts use a one, two, three month split instead, for example one month for Bands 1 to 4, two months for Bands 5 to 7 and three months for Bands 8 to 9. The statutory minimums under the Employment Rights Act 1996 section 86 are the floor under all of this: at least one week's notice after one month of service when you resign, and one week per complete year of service from two years, capped at twelve weeks, when the employer ends the employment. Your contract is the document that decides your period, so read it before you rely on any convention. The notice periods by band guide sets out the convention in full.

Sources and independence

Source: GOV.UK, termination payments and tax.

Source: GOV.UK, redundancy rights and notice periods.

Source: NHS Employers, 2026/27 pay award announcement.

Source: Agenda for Change Terms and Conditions, Handbook paragraph 19.2, notice periods, and Section 13, annual leave.

NHS Bands Pay is an independent guide and is not affiliated with the NHS. Figures were verified against official sources on 6 November 2026 and can change, always confirm with the relevant official body before making financial decisions.