Changes to post-employment notice pay (termination payments)

Where an individual’s employment is terminated on or after 6 April 2021, the formula for calculating post-employment notice pay (PENP) has been amended under s402D ITEPA 2003 of the Finance Bill 2020-21.

The change affects those employees who have a pay period defined in months, but a contractual notice period defined in weeks or days. Rather than basing the calculation on the number of days in the pay period, employers should now calculate PENP based on an averaged 30.42 days in the employee’s last pay period.

Please note that this will generally only affect employees where a settlement has been agreed.

Further information on the policy changes can be found here.