Include a pay in lieu of notice clause in an employment contract

Key points

  • Including a pay in lieu of notice (PILON) clause in an employment contract will allow the employer to dismiss the employee and pay him or her in lieu of the notice period, without this amounting to a breach of contract.
  • If there is no PILON clause and the employer breaches the employee's contract by dismissing him or her without notice, the employee may not be bound by post-employment restrictive covenants, such as a non-solicitation clause.
  • Another advantage of including a PILON clause in an employment contract is that it allows the employer to define how the payment will be calculated, for example by excluding certain contractual benefits.

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