How should a payment in lieu of notice be calculated?
A payment in lieu of notice should include all the remuneration and benefits to which the employee would have been entitled under his or her contract during the notice period. This includes any contractual benefits such as health insurance, a car allowance or contractual bonuses.
The employer can withhold contractual benefits from the payment in lieu only if the contract includes a payment in lieu of notice clause providing for this. For example, the employment contract could state that any payment in lieu of notice will be limited to basic salary only or could exclude the employee from receiving a bonus during the notice period. The employer should check the exact terms of the contract when calculating the payment.