What is payment in lieu of notice?
Payment in lieu of notice is when an employer pays out the notice period instead of having the employee work it.
Payment in lieu of notice (often shortened to PILON) is when an employer ends employment immediately and pays the employee the amount they would have earned during the notice period, rather than having them work it out. The minimum notice an employer must give is set by the National Employment Standards under the Fair Work Act 2009.
The payment must cover at least the full rate the employee would have received for working the ordinary hours in the notice period. An employer can pay out part of the notice and have the employee work the rest, as long as the total notice meets the legal minimum.
Key facts
- •Minimum notice is set by the National Employment Standards in the Fair Work Act 2009
- •The payment must equal at least the full pay the employee would have received for the notice period
- •An employer can split notice — part worked, part paid out
- •Notice (or payment in lieu) is not required where an employee is dismissed for serious misconduct
- •This applies to employer-initiated termination, not when an employee resigns
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Notice Period CalculatorFrequently asked questions
How much notice is my employer required to give?
Under the National Employment Standards, the minimum ranges from 1 to 4 weeks depending on your length of service, plus an extra week if you are over 45 and have at least 2 years' service. Your award or contract may provide more.
Is payment in lieu of notice taxed?
Yes, payment in lieu of notice is generally taxable. How it is taxed can depend on whether it is part of a genuine redundancy or a normal termination, so check the ATO guidance for your situation.
FairWork Mate is an independent commercial service. We are not affiliated with, endorsed by, or associated with the Fair Work Ombudsman, the Fair Work Commission, or any Australian Government agency. Content is general information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.