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Section 86 of the Employment Rights Act 1996 guarantees an employee 1 week's notice from the employer after one month of continuous employment, rising by a week for each complete year of service to a maximum of 12 weeks after 12 years [1]. The employee, in turn, owes at least 1 week's notice to resign, however long the service [5].
Those minimums look simple, but they drive several payroll decisions at once. They fix the last day of employment, decide whether an employee off sick during notice receives full pay or only Statutory Sick Pay, and set the value of any payment in lieu of notice, which since 6 April 2018 has been taxed and subject to Class 1 National Insurance as earnings [18] [20].
This guide sets out the statutory scale, how it interacts with contractual notice, when notice starts, what must be paid during notice, the ways a notice period can be shortened or not worked, and how notice pay is processed through PAYE and Real Time Information.
Key takeaways
- Employer notice is 1 week for 1 month to 2 years of service, then 1 week per complete year, capped at 12 weeks.
- An employee with one month's service must give at least 1 week's notice, unless the contract requires more.
- A contract can give longer notice but never less than the statutory minimum, and notice terms must be in the written statement from day one.
- Where contractual notice is less than a week longer than statutory notice, the employee is paid in full during notice even when off sick, on holiday or on family leave.
- Notice pay, whether worked, paid on garden leave or paid in lieu, is taxed and subject to Class 1 National Insurance.
- A payment in lieu made after the P45 is issued uses code 0T on a week 1 or month 1 basis.
What the statutory notice period is
The statutory notice period is the legal minimum that either party must give to end an employment contract. It applies only to employees, so agency workers, casual workers and most zero-hours workers are unlikely to be covered [4].
Notice the employer must give
The employer's minimum depends on continuous employment. The table below sets out the scale in section 86(1).
| Continuous employment | Minimum notice from employer |
|---|---|
| Less than 1 month | No statutory minimum |
| 1 month to less than 2 years | 1 week |
| 2 years to less than 12 years | 1 week per complete year |
| 12 years or more | 12 weeks |
Only complete years count. Acas gives the example of an employee with 4 years and 9 months of service, who is entitled to 4 weeks [4]. The scale is the same whether the dismissal is for capability, conduct short of gross misconduct, or redundancy [2].
Notice the employee must give
The statutory duty on the employee is flat. After one month's continuous employment the employee must give at least 1 week, and that figure does not grow with service [1]. An employee with less than a month's service, and no notice term in the written statement, does not have to give any notice [5].
Most contracts require more from the employee, typically matching the employer's period for senior roles. Where an employee leaves without giving the contractual notice and no alternative is agreed, the employee is likely to be in breach of contract [5].
Contractual notice and the written statement
A contract can set longer notice than the statute, but any shorter term is overridden by section 86 [1]. GOV.UK states the same principle from the employee's side: the contract can give more than the statutory minimum, but not less [2].
Notice periods are one of the particulars the employer must provide on the first day of employment, either in the principal written statement or in a separate document the employee has reasonable access to [13]. Acas notes that contractual notice can also be set in a staff policy [4].
Short fixed-term contracts
A fixed-term contract of one month or less is treated as if it were for an indefinite period once the employee has been employed for three months or more, which brings the statutory notice rules into play [1]. Employers that roll staff over on short contracts should therefore track continuous service rather than the contract dates alone [12].
When notice starts and ends
A notice period has a precise start and end, and both feed into the leaving date that payroll reports to HMRC.
When the notice period starts
If the contract says when notice starts, that term applies. Otherwise, Acas explains that notice starts the day after the employee resigns or the employer tells the employee in person of the dismissal [6]. Written notice starts once the employee has had a reasonable time to read it, and a letter sent while the employee is on holiday might not start the clock until the employee is home [6].
The effective date of termination
Where notice is given, employment ends on the date the notice expires [12]. If the employer dismisses with short or no notice, section 97(2) can push the effective date of termination forward to when statutory notice would have expired, for the purposes of the qualifying period for unfair dismissal and redundancy pay calculations [12]. That matters as qualifying periods change: the government plans to reduce the unfair dismissal qualifying period to 6 months for dismissals from 1 January 2027 [21].
Pay during the notice period
An employee working notice is paid as normal [8]. The harder question is what happens when the employee cannot work during notice.
The one-week rule
Sections 87 to 91 give employees protected pay during the statutory notice period, but section 87(4) switches that protection off where the contract requires the employer to give at least one week more than the statutory minimum [9]. Acas summarises the effect: if contractual notice is the same as statutory notice or less than a week longer, the employee gets full normal pay for the whole notice period even when off sick, on holiday or on statutory family leave [8].
The table below compares the two positions for an employee dismissed with 7 years' service, so a statutory minimum of 7 weeks.
| Contractual notice | Gap over statutory | Pay if off sick during notice |
|---|---|---|
| 7 weeks | None | Full normal pay for the notice period |
| 7 weeks and 6 days | Less than 1 week | Full normal pay for the notice period |
| 8 weeks | 1 week or more | Only the pay due for the absence, such as SSP or contractual sick pay |
Sickness, holiday and family leave
For employees with normal working hours, section 88 makes the employer liable to pay at least normal remuneration for hours in the notice period when the employee is ready to work but none is provided, is sick or injured, is on a listed family leave, or is on holiday [10]. Payments already made for those hours, including SSP, contractual sick pay, statutory family pay and holiday pay, count towards that liability [10].
Employees without normal working hours are covered by section 89 instead, which guarantees at least a week's pay for each week of notice provided the employee is available and willing to do reasonable work [11]. Where the employee gave the notice, the protection only bites once the employee actually leaves under it [10].
As a worked example, take an employee earning £600 a week with 7 years' service who falls ill during notice. On a 7-week contractual notice, the employer pays £600 for each week, £4,200 over the period [10]. On an 8-week contractual notice with no company sick pay, the employee receives only SSP at the weekly rate of £123.25 or 80% of normal weekly earnings, whichever is lower [14]. Acas also notes that once 28 weeks of SSP have been used, there may be no pay at all during notice [8].
How notice pay is valued
For redundancy dismissals, GOV.UK states that notice pay is based on the average the employee earned per week over the 12 weeks before notice starts [3]. For hourly protection under section 88, the hourly rate is a week's pay divided by the normal weekly hours [10]. Employers running payroll in-house rely on HMRC-recognised UK payroll software to hold the 12 weeks of pay history that this averaging needs.
Ending employment without working the full notice
Notice does not always have to be worked. Four routes are common, and each has different consequences for pay, benefits and holiday.
Garden leave
During garden leave the employer tells the employee not to work some or all of the notice period, often to keep the employee away from confidential information. The employee is still employed and must be paid as usual, including contractual benefits [7]. The Moonworkers guide to garden leave explains when a contract allows it and how it runs through payroll [18].
Payment in lieu of notice
A payment in lieu of notice (PILON) ends employment immediately. Where the contract contains a PILON clause, the employer may be able to insist on it, but without one the employer can only offer it and the employee can refuse [7]. The payment covers the basic pay for the notice period plus contractual extras such as pension contributions or private health insurance [3] [2]. The full mechanics are in the guide to payment in lieu of notice.
Agreed early release
The employer and employee can agree to shorten notice where it suits both, and the agreement should be recorded in writing, for example by email [4]. Where an employee leaves early without agreement, some contracts allow the employer to deduct the costs of replacement cover, and the employer may be able to recover those costs through the courts [5].
Gross misconduct and summary dismissal
Section 86(6) preserves the right of either party to end the contract without notice because of the other's conduct [1]. An employee dismissed for gross misconduct is not entitled to statutory notice or notice pay [4], but GOV.UK stresses that the employer should still investigate before dismissing [22]. An employee who resigns in response to a serious breach by the employer does not have to give notice either [8].
The table below compares the four routes.
| Route | Employment continues to end of notice | Holiday accrues | Contractual benefits |
|---|---|---|---|
| Notice worked | Yes | Yes | Yes |
| Garden leave | Yes | Yes | Yes |
| PILON | No, ends immediately | No | Only if the clause or agreement provides |
| Summary dismissal | No, ends immediately | No | No notice entitlement |
Holiday during the notice period
Holiday and notice interact in two ways: taking leave during notice, and paying for leave that is not taken.
Taking holiday during notice
An employer can require a worker to take holiday by giving at least twice as many days' notice as the days of leave, so 5 days off requires 10 days' notice, unless a relevant agreement says otherwise [15]. A worker can ask to use accrued holiday during notice, subject to the usual notice rules and the employer's agreement [15]. The guide to the Working Time Regulations explains how statutory leave accrues.
Paying untaken holiday
Any untaken statutory holiday accrued by the leaving date must be paid in lieu in the final pay [16]. An employer can recover holiday taken in excess of entitlement only if the worker agreed to that deduction in the contract or in writing beforehand [16]. Holiday pay on termination is taxed and subject to National Insurance like other earnings [18].
Processing notice pay through payroll
Notice pay is earnings, whichever way the notice ends. The difference lies in timing, the tax code and how the payment is reported.
Notice worked or paid on garden leave
When notice is worked, or the employee is on garden leave, pay runs through the normal payroll on the employee's existing tax code. For an employee on £36,000 a year paid £3,000 a month on code 1257L, category A, the engine behind the Moonworkers calculator gives income tax of £390.20 and employee National Insurance of £156.16 for a month of notice, with take-home pay of £2,453.64 [24] [23]. The employer also pays £387.45 in employer National Insurance for that month at the 15% rate [23].
Payment in lieu and the PENP formula
Since 6 April 2018, employers must calculate post-employment notice pay (PENP) for every relevant termination award, whether the PILON is contractual or not, and PENP is taxed as general earnings without the benefit of the £30,000 threshold [19] [18]. HMRC's National Insurance Manual confirms that PENP is earnings for Class 1 NICs [20].
Where the PILON is paid after the P45 has been issued, the employer uses code 0T on a week 1 or month 1 basis and still deducts National Insurance [17]. Taking the same £3,000 paid as a one-month PILON after leaving, the engine gives income tax of £600 and employee National Insurance of £156.16, so the employee receives £2,243.84 [17] [24]. The extra £209.80 of tax arises because 0T gives no personal allowance in that period, and the employee can reclaim any overpayment from HMRC.
Final FPS and the P45
When an employee leaves, the employer adds the leaving date to the payroll record on the final Full Payment Submission and gives the employee a P45 [17]. A later payment, such as notice pay or a PILON settled after the P45, is reported on the next FPS with the original leaving date and the payment after leaving indicator, and no second P45 is issued [17]. The guide to what a P45 is covers the form itself, and bureaux handling leavers across many schemes keep this reporting consistent from a multi-client payroll dashboard [3].
Notice in a redundancy
Redundancy adds rights that run inside the notice period. An employee with 2 years' continuous service, counted to the end of notice, can take reasonable paid time off during notice to look for work or arrange training [25]. Acas explains that the pay for that time off is limited to 40% of a week's pay, so an employee earning £500 a week who takes 5 days off is paid £200 [26].
Individual notice also sits alongside any collective process. Where 20 or more redundancies are proposed at one establishment, no dismissal can take effect until the 30 or 45 day consultation period has run, although notice can be served during it [27]. The guide to the redundancy consultation period explains how those clocks fit together.
Disputes over notice are usually wrongful dismissal claims, which can go to an employment tribunal or the civil courts [4]. From 1 October 2026 the time limit for bringing employment tribunal claims rises from 3 to 6 months [21].
Check the take-home value of notice pay
Notice pay is ordinary earnings, so its net value depends on the tax code and National Insurance category in use. The Moonworkers UK salary calculator applies the 2026-27 PAYE and National Insurance rules to any gross amount and pay period.
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About this calculator
This calculator gives you a close estimate of your UK payroll deductions for 2026-27, using HMRC's exact percentage method with periodised thresholds. It handles the three tax territories, K codes with the 50% regulatory limit and its carry-forward, weeks 53, 54 and 56, the cumulative and W1/M1/X bases, student and postgraduate loans, and pension contributions on qualifying earnings. It still won't match your payslip to the penny in every case: it does not cover in-year tax code changes, payrolled benefits in kind, NI deferral across more than one employment, directors on the annual earnings period, or employer-level annual adjustments such as the Employment Allowance and the apprenticeship levy. Powered by the same engine as the Moonworkers Payroll API.
Frequently asked questions
Why might the result differ from my payslip?
This calculator uses your current gross pay and tax code to produce an estimate. K-code carry-forwards and weeks 53, 54 and 56 are handled, and the Year-to-date section reproduces a specific period exactly. What your employer may apply that this does not: a mid-year tax code change, benefits in kind processed through payroll, or NI deferral across more than one employment. For most employees on a standard tax code the difference is negligible.
What tax code should I enter?
Use the tax code shown on your most recent payslip or the PAYE Coding Notice (P2) from HMRC. If you're not sure, 1257L is the standard code for most employees resident in England, Wales, or Northern Ireland. Use S1257L for Scotland or C1257L for Wales if you pay Scottish or Welsh income tax.
Which NI category applies to me?
Most employees use Category A. Use M if you are under 21, H if you are an apprentice under 25, or C if you are over State Pension age. Your employer is responsible for assigning the correct category — if in doubt, check your payslip.
Which student loan plan am I on?
Your plan depends on when and where you studied. Plan 1 covers students who started before September 2012. Plan 2 is for English and Welsh students who started from September 2012 to July 2023. Plan 5 applies to English students who started from August 2023. Plan 4 covers Scottish students. You can check your plan at gov.uk or on your payslip.
What is the YTD cumulative PAYE mode?
HMRC's standard method calculates income tax on your total earnings to date each period, then subtracts tax already paid. If you're mid-year and want to see exactly what tax should be deducted in a specific period, expand the Year-to-date section and enter your running totals from previous periods only.
Conclusion
The statutory notice period is short to state and wide in its effects. One sliding scale, from 1 to 12 weeks, sets the leaving date, decides whether sickness or holiday during notice is paid in full, values any payment in lieu, and feeds the qualifying periods that determine an employee's other rights.
The details sit in the gap between statute and contract. A notice clause only a few days longer than the statutory minimum leaves full-pay protection in place, while a clause a week longer removes it, and a PILON clause decides whether notice can be bought out at all. As qualifying periods shorten and tribunal time limits lengthen, employers that check contracts against the statutory scale and let payroll calculate notice pay from accurate service and earnings data will settle leavers cleanly and avoid disputes later.
Frequently asked questions
How much statutory notice does an employee get after 5 years?
An employee with 5 complete years of continuous service is entitled to at least 5 weeks' notice from the employer [1]. Only complete years count, so 5 years and 11 months still gives 5 weeks [4]. A longer contractual period applies if the contract provides one.
Is notice pay taxable?
Yes. Notice pay is earnings and is subject to income tax and Class 1 National Insurance whether the notice is worked, spent on garden leave or paid in lieu [18]. A PILON is valued through the PENP formula and cannot use the £30,000 termination payment threshold [19].
Does an employee get full pay if off sick during notice?
It depends on the gap between contractual and statutory notice. Where the contract gives the same notice as the statute, or less than a week more, the employee receives full normal pay during notice even when off sick [8]. Where contractual notice is at least a week longer, the statutory protection does not apply and only sick pay due under the contract or SSP is paid [9].
Can an employee leave before the end of the notice period?
Only by agreement with the employer, ideally confirmed in writing [5]. Leaving early without agreement is likely to be a breach of contract, unless the employer had already seriously breached the contract, and employment then ends on the agreed date reported on the final FPS [17].
