Payment in lieu of notice means that you will not have to work for the period between receiving notice and the ending of your employment, but you will get the same amount of wages that you would have received, had you worked. This payment is not regarded as wages or salary but as compensation for loss of employment. This means that it may be exempt from income tax and USC (you do not pay PRSI on it). However if your contract of contract of employment provides for a payment of this kind on termination of the contract or if you work for the period of notice, you pay tax and PRSI in the normal way.
If you get payment in lieu of notice you are considered to be unemployed and available for work during this period. This means that you can claim a jobseeker’s payment. You cannot claim a jobseeker’s payment for any day that you are receiving holiday pay (see below).
If you are accepting payment in lieu of notice, the date on your P45 is the date that you physically leave the job. For tax and social welfare purposes your employment has ceased. This allows you to claim social welfare benefits. However, the P45 does not prove the termination date of your employment for the purposes of employment law. Under section 7 of the Minimum Notice and Terms of Employment Act 1973, if you accept payment in lieu of notice, then the date of termination of your employment is the date on which notice (if it had been given) would have expired.
During your period of notice you should receive your normal pay. This also applies if you are paid in lieu of notice.
They are correct in what they have said. You won't accrue any further annual leave as you are not working and holidays are tied to hours works unless something different in provided for in your contract
Under Section 19 (1) of the Act you are entitled to a basic annual paid leave entitlement of 4 weeks. There are 3 different ways of calculating your annual leave entitlement:
- Based on the employee's working hours during what is called the leave year, which runs from April to March. An employee who has worked at least 1,365 hours in a leave year is entitled to the maximum of 4 working weeks' paid annual leave unless it is a leave year in which they change employment. Many employers use the calendar year (January-December) instead of the official leave year to calculate entitlement
- By allowing 1/3 of a working week for each calendar month in which the employee has worked at least 117 hours
- 8% of the hours worked in the leave year, subject to a maximum of 4 working weeks
An employee may use whichever of these methods gives the greater entitlement. When calculating the entitlement, employers should include all hours worked including time spent on annual leave, maternity leave, parental leave, force majeure leave, adoptive leave or the first 13 weeks of carer’s leave