Pension contributions on PILON
Discussion
I've recently been made redundant and been paid in lieu of notice. There is no provision in my employment contract for PILON.
My employer (ex-employer now) has not made any employer pension contributions on the PILON amount (nor indeed have they deducted any employee contributions either).
Is this normal?
My employer (ex-employer now) has not made any employer pension contributions on the PILON amount (nor indeed have they deducted any employee contributions either).
Is this normal?
Sy1441 said:
Yes, it's non-pensionable.
Perhaps I'm misreading it, but the below text taken from the ACAS website seems at odds with your view.https://www.acas.org.uk/dismissals/notice-periods-...
ACAS website said:
It might say in the person's contract what the payment should be, for example if they should get any work benefits they'd normally get, such as pension contributions.
An employer can still offer payment in lieu of notice if it's not in the contract. It should be agreed between the employer and employee in writing.
When it's not in the contract, it's a good idea for the employer to offer full pay including any usual work benefits. If the employer does not do this it could be seen as a breach of contract.
Given the value of the contributions here is sub £1k I'm loathe to spend £300+ on engaging an employment lawyer, hence why I've asked the good folk of PH. An employer can still offer payment in lieu of notice if it's not in the contract. It should be agreed between the employer and employee in writing.
When it's not in the contract, it's a good idea for the employer to offer full pay including any usual work benefits. If the employer does not do this it could be seen as a breach of contract.
It's an interesting question. On the one hand I would say that you should be paid your full package, including pension contributions - and that you should have the option of making contributions to a pension to avoid tax. However, I don't think an employer is obliged to pay pension contributions on PILON.
On the other hand, I would consider it a bonus to receive PILON, rather than having to work out notice period in the garden.
I would like to see some clarity in this, especially with regard to salary sacrifice. I'm sacrificing quite a bit of my salary into a pension. I suspect that if I were offered PILON, then this sacrificed salary would not be paid to me - neither would it go into my pension. I think that my redundancy would also be calculating on my "net income before tax" too. In this case I would be better off not taking PILON and receiving the full package.
On the other hand, I would consider it a bonus to receive PILON, rather than having to work out notice period in the garden.
I would like to see some clarity in this, especially with regard to salary sacrifice. I'm sacrificing quite a bit of my salary into a pension. I suspect that if I were offered PILON, then this sacrificed salary would not be paid to me - neither would it go into my pension. I think that my redundancy would also be calculating on my "net income before tax" too. In this case I would be better off not taking PILON and receiving the full package.
WhiskyDisco said:
It's an interesting question. On the one hand I would say that you should be paid your full package, including pension contributions - and that you should have the option of making contributions to a pension to avoid tax. However, I don't think an employer is obliged to pay pension contributions on PILON.
On the other hand, I would consider it a bonus to receive PILON, rather than having to work out notice period in the garden.
I would like to see some clarity in this, especially with regard to salary sacrifice. I'm sacrificing quite a bit of my salary into a pension. I suspect that if I were offered PILON, then this sacrificed salary would not be paid to me - neither would it go into my pension. I think that my redundancy would also be calculating on my "net income before tax" too. In this case I would be better off not taking PILON and receiving the full package.
There are a couple of benefits of PILON to the employee worth considering though.On the other hand, I would consider it a bonus to receive PILON, rather than having to work out notice period in the garden.
I would like to see some clarity in this, especially with regard to salary sacrifice. I'm sacrificing quite a bit of my salary into a pension. I suspect that if I were offered PILON, then this sacrificed salary would not be paid to me - neither would it go into my pension. I think that my redundancy would also be calculating on my "net income before tax" too. In this case I would be better off not taking PILON and receiving the full package.
1. You could 'double-dip' by getting a new job within the 'notice' period and so gain financially.
2. You could benefit from saved employee NICs as all the payment is made within a single pay run and more salary will be captured within the 2% NIC band.
Jasandjules said:
Sy1441 said:
Yes, it's non-pensionable.
What makes you say that? OP if there is no Pilon clause I presume there is also no clause which says your benefits will not be paid during this period (is there a Garden Leave clause?)
oyster said:
There are a couple of benefits of PILON to the employee worth considering though.
1. You could 'double-dip' by getting a new job within the 'notice' period and so gain financially.
2. You could benefit from saved employee NICs as all the payment is made within a single pay run and more salary will be captured within the 2% NIC band.
Isn't the fall in the EEs NI rate more than offset by the increase in Income tax rate from 20% to 40%?1. You could 'double-dip' by getting a new job within the 'notice' period and so gain financially.
2. You could benefit from saved employee NICs as all the payment is made within a single pay run and more salary will be captured within the 2% NIC band.
Countdown said:
oyster said:
There are a couple of benefits of PILON to the employee worth considering though.
1. You could 'double-dip' by getting a new job within the 'notice' period and so gain financially.
2. You could benefit from saved employee NICs as all the payment is made within a single pay run and more salary will be captured within the 2% NIC band.
Isn't the fall in the EEs NI rate more than offset by the increase in Income tax rate from 20% to 40%?1. You could 'double-dip' by getting a new job within the 'notice' period and so gain financially.
2. You could benefit from saved employee NICs as all the payment is made within a single pay run and more salary will be captured within the 2% NIC band.
Income tax is based on income over the whole tax year, national insurance is based on the pay period.
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