Would you plesae explain me.

Generally when someone is leaving they either have to give or receive notice. Sticking to receiving notice, because giving notice is a minefield that you wont have to deal with, if your employer wants you to leave he has to give you notice to go, at least one week and up to whatever it says in your contract. Maximum statutory notice is 12 weeks.

This means the employer tells you to go now, with one month notice you carry on working for one month and then your gone.

Say the employer wants you to go, gives you notice but tells you to leave right now, not in a months time. In this case you have to receive compensation in lieu of the notice so that you do not lose out financially.

The correct technical method of calculating compensation in lieu is to work out the net value of it after making assumptions about the amount of income tax and NIC which would probably have been deducted. The lazy way is to just work out a months gross pay and give it to them now and tell them not to come back.

The revenue tends not to worry themselves about such a payment as long as it is less than £30k but if it happens too often they will question it and seek evidence that it is a genuine PILON payment. The payment must be genuine, there must be a true dismissal to generate the notice period, there must be nothing in the contract which gives any right to a payment in lieu and there must be few other events of a similar nature otherwise they will claim a custom and practice charge.

If the payment fails these tests it will be liable for IT and NIC in the pay period in which it is paid, otherwise it can be paid gross without concern.

Payrollpro