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Notice and pay in lieu of notice

Updating author: Max Winthrop


  • If an employee is dismissed he or she is entitled to be given notice in accordance with the provisions in s.86 of the Employment Rights Act 1996 or in accordance with the notice provisions in his or her contract - whichever is the greater. (See Notice periods)
  • Failure to give notice will be a breach of contract entitling the employee to make a contractual claim for breach of contract. (See Dismissal in breach of contract: wrongful dismissal)
  • The employer may be entitled to dismiss with no notice, or short notice, if the employee has committed a serious breach of contract, sometimes referred to as gross misconduct. (See Summary dismissal)
  • If the employer gives the employee pay in lieu of notice this will be a breach of contract unless there is an express provision in the employee's contract allowing it to do this. Such a breach of contract will not, however, permit the employee to recover damages in bringing a claim for breach of contract provided that the payment in lieu compensated the employee fully for the wages and benefits that he or she would have received in the notice period. (See Pay in lieu of notice)
  • Pay in lieu of notice, whether contractual or not, will be subject to tax and Class 1 national insurance contributions. (See Taxation of pay in lieu)
  • If the employer pays in lieu in breach of contract, this may affect the enforceability of any restrictive covenants in the employee's contract of employment.
  • The measure of damages in a claim for wrongful dismissal will be the employee's basic pay together with any other contractual entitlements that would have accrued in the notice period. (See Dismissal in breach of contract: wrongful dismissal)
  • The employer will be entitled to bring a claim for breach of contract against the employee if the employee resigns without giving due notice and the employer can show that it has suffered financial loss as a result of the breach.
  • Depending on the basis of the claim and its value a claim for breach of contract can be brought in the county court, the High Court or an employment tribunal. (See Forum for making a claim)

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