Does Statutory Redundancy PILON Account For Overtime?
Discussion
Edit: Thinking about it, this may have been better in the jobs/employment section. Ah well.
Morning all,
Got a fairly specific question here regarding how pay in lieu of notice is calculated when it is for the statutory notice period attached to a redundancy.
From the gov.uk advice page, I can see that it is meant to be the average weekly pay you have received for the 12 weeks prior to being given your notice which is used as the weekly figure for what you would receive as payment in lieu of notice should you be asked to leave immediately rather than working your notice.
So if in the preceding 12 weeks you have, for whatever reason, had 6 weeks at £300 and 6 at £500, then your average weekly income was £400, and so your weekly pay is considered to be £400 for the purpose of PILON.
I believe that this must include any shift allowances or other benefits, and that overtime should be included if you are required to work it.
Now, in 2015 (I think), there was a question on holiday pay calculation, that set out a precedent that the similar "prior average" used for calculating holiday pay should include OT if it had been worked regularly, and then a later (2019?) precedent was set that voluntary overtime was also included in this if it represented a consistent pattern of work.
So going on holiday for a week after doing a few hours OT every week for several months prior means your holiday pay for that week would include the average uplift from the OT, in addition to your basic wage.
This is how my company calculates holiday pay, and has done for several years now.
However, we are (unsurprisingly, given the current situation) looking at having redundancies. People will not be asked to work their notice period, and will receive pay in lieu of notice.
Our HR department have said that the calculation of weekly rate will account for shift allowances, but will not include overtime. So someone who has worked, say, 10hrs OT every week for the 12 weeks in the period used for PILON calculation will not receive a weekly rate over someone on an identical pay level who has worked no OT.
My question is whether this is correct, or, as per holiday pay, voluntary overtime worked during this representative period should be considered to be a regular pattern of work, and therefore taken into account in calculating an employee's "weekly pay" for PILON?
Apologies for the long ramble, wanted to try and ensure I went through the entire thought process related to it!
Morning all,
Got a fairly specific question here regarding how pay in lieu of notice is calculated when it is for the statutory notice period attached to a redundancy.
From the gov.uk advice page, I can see that it is meant to be the average weekly pay you have received for the 12 weeks prior to being given your notice which is used as the weekly figure for what you would receive as payment in lieu of notice should you be asked to leave immediately rather than working your notice.
So if in the preceding 12 weeks you have, for whatever reason, had 6 weeks at £300 and 6 at £500, then your average weekly income was £400, and so your weekly pay is considered to be £400 for the purpose of PILON.
I believe that this must include any shift allowances or other benefits, and that overtime should be included if you are required to work it.
Now, in 2015 (I think), there was a question on holiday pay calculation, that set out a precedent that the similar "prior average" used for calculating holiday pay should include OT if it had been worked regularly, and then a later (2019?) precedent was set that voluntary overtime was also included in this if it represented a consistent pattern of work.
So going on holiday for a week after doing a few hours OT every week for several months prior means your holiday pay for that week would include the average uplift from the OT, in addition to your basic wage.
This is how my company calculates holiday pay, and has done for several years now.
However, we are (unsurprisingly, given the current situation) looking at having redundancies. People will not be asked to work their notice period, and will receive pay in lieu of notice.
Our HR department have said that the calculation of weekly rate will account for shift allowances, but will not include overtime. So someone who has worked, say, 10hrs OT every week for the 12 weeks in the period used for PILON calculation will not receive a weekly rate over someone on an identical pay level who has worked no OT.
My question is whether this is correct, or, as per holiday pay, voluntary overtime worked during this representative period should be considered to be a regular pattern of work, and therefore taken into account in calculating an employee's "weekly pay" for PILON?
Apologies for the long ramble, wanted to try and ensure I went through the entire thought process related to it!
Edited by InitialDave on Friday 31st July 10:10
it is very dependent on what your contract states, see below from ACAS
What are the PILON rules on benefits in kind, bonuses and commissions?
"The usual position is to provide, in the contract, that the PILON payment will cover basic pay only and that there will be no payment in respect of non-cash benefits, bonuses or commissions during the notice period and thus they will not need to be reflected in a payment in lieu.
However, if the PILON clause does not deal with such benefits and remains silent on the issue, the default position is that the employee should be compensated for the loss of any benefit under the contract for the duration of the notice that should have been given. Thus the PILON payment would include all and any benefits to which the employee may be entitled.
It is therefore important to be clear in the contract exactly how the PILON payment is calculated."
What are the PILON rules on benefits in kind, bonuses and commissions?
"The usual position is to provide, in the contract, that the PILON payment will cover basic pay only and that there will be no payment in respect of non-cash benefits, bonuses or commissions during the notice period and thus they will not need to be reflected in a payment in lieu.
However, if the PILON clause does not deal with such benefits and remains silent on the issue, the default position is that the employee should be compensated for the loss of any benefit under the contract for the duration of the notice that should have been given. Thus the PILON payment would include all and any benefits to which the employee may be entitled.
It is therefore important to be clear in the contract exactly how the PILON payment is calculated."
InitialDave said:
Thanks for the reply, though if I'm reading that right, that quote is specifically regarding non-cash benefits, so for instance the company providing the use of things, or perhaps something like a gym membership?
No as it states non cash is just one part of it. It really does rest on the contract wording, if your contract is specifically worded to exclude everything except basic salary for notice PILON payments, then that is what you are stuck with, if it makes no mention either way then you should be entitled to all the regular payments that make up your salary.Have a look the ACAS website, it has a lot of very useful information and more important it will be correct information
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