Statutory minimum vs contractual notice
In the UK, notice periods are governed by two sources: statute (the Employment Rights Act 1996 s.86) and your employment contract. You are always entitled to whichever is greater.
The statutory minimum notice an employer must give you depends on your length of continuous service:
- 1 month to 2 years service: 1 week
- 2–12 years service: 1 week per complete year (so 5 years = 5 weeks)
- 12 or more years service: 12 weeks (the cap)
If your contract says "3 months' notice" and you have 2 years of service (statutory = 2 weeks), you are entitled to the contractual 3 months — the contract wins because it is more generous. Conversely, if your contract says "1 week" after 8 years of service, you are entitled to the statutory 8 weeks — statute overrides a less generous contract.
Notice the employee must give
The law only requires an employee to give 1 week's notice after 1 month of service (ERA 1996 s.86(2)) — regardless of how long they have worked there. In practice, most employment contracts specify a longer notice period for the employee (typically 1–3 months for salaried roles). If your contract requires more, you are legally bound by it.
If you resign without giving the required notice, your employer may withhold pay for the unworked period — but only if the contract expressly allows this as a liquidated damages clause. In practice, most employers do not pursue employees who resign short, though they can bring a breach of contract claim.
Pay in lieu of notice (PILON)
Pay in lieu of notice (PILON) means your employer pays you the cash equivalent of your notice period rather than asking you to work it. PILON requires either an express PILON clause in your contract, or your agreement at the time of termination. Without one of these, your employer asking you to leave immediately without pay for the notice period is wrongful dismissal.
Since 6 April 2018, all PILON is fully taxable as earnings — income tax and NI apply at source. There is no longer any distinction between contractual and non-contractual PILON for tax purposes. PILON does not benefit from the £30,000 termination payment exemption.
What must PILON include?
PILON must cover your full contractual pay for the notice period — including any regular overtime, commission, or benefits that form part of your normal pay. It cannot be based on basic salary alone if you routinely receive commission on top. Courts look at what you would have actually received had you worked the notice period.
Garden leave
Garden leave is a middle ground: you remain employed, continue to receive full pay and benefits, but are told not to come in to work. Your employer keeps you "on the bench" during the notice period — usually to protect client relationships, confidential information, or to prevent you going directly to a competitor while still bound by your employment contract.
Garden leave requires either an express garden leave clause in your contract, or your agreement at the time. During garden leave you remain subject to all contractual obligations — including post-termination restrictions (non-competes, non-solicitation clauses) — because you are still technically employed.
Garden leave costs the same as PILON in base salary terms, but pension contributions, private medical insurance, and other benefits continue to accrue — making it potentially more expensive for the employer.
Wrongful dismissal
Wrongful dismissal is a breach of contract claim — it arises when your employer dismisses you without giving you the full notice (or PILON) you are entitled to, without justification. Unlike unfair dismissal, wrongful dismissal:
- Can be claimed from day one of employment (no 2-year qualifying period)
- Can be brought in the Employment Tribunal (up to £25,000) or in the county court (unlimited)
- The claim value is typically the pay you would have received during your notice period
Summary dismissal (firing someone on the spot without notice) is only lawful where the employee has committed gross misconduct — a serious breach of contract that justifies immediate termination. Examples include theft, fraud, violence, or a serious safety breach. If there is no genuine gross misconduct, summary dismissal is wrongful.
Notice periods and restrictive covenants
Post-termination restrictions (non-competes, non-solicitation, non-dealing clauses) only take effect after your employment ends. The notice period is therefore important: the longer your notice period, the later your restrictions start running. For senior employees with lengthy notice periods, this can mean non-compete clauses run 6–12 months from the end of your last day of employment — not from the day you were first told you were leaving.
If you are put on garden leave during your notice period, UK courts often reduce the effective duration of a post-termination restriction to reflect the time already spent on garden leave. Seek legal advice if your employer is trying to enforce a non-compete after a long garden leave.