Calculating Pay in Lieu of Notice Ontario

When an employee leaves their job before the end of their notice period, they may be entitled to pay in lieu of notice (PILON). This calculator helps you determine the correct amount of PILON due in Ontario, considering both common law and employment standards requirements.

What is Pay in Lieu of Notice?

Pay in lieu of notice (PILON) is compensation an employee receives when they leave their job before completing their notice period. In Ontario, PILON is calculated based on the employee's regular wages and the length of the notice period they did not complete.

In Ontario, the Employment Standards Act requires employers to provide at least two weeks' notice for employees who have worked for at least six months. However, common law principles may apply for longer notice periods.

Key Components of PILON Calculation

Regular wages - The employee's standard hourly or weekly pay
Notice period length - The duration of notice the employee was supposed to give
Uncompleted portion - The portion of the notice period the employee did not complete

How to Calculate Pay in Lieu of Notice

The basic formula for calculating PILON is:

PILON = (Regular Wages × Notice Period Length) × (Uncompleted Portion / Total Notice Period)

For example, if an employee earns $25/hour, has a 4-week notice period, and leaves after 2 weeks:

PILON = ($25 × 4 weeks) × (2 weeks / 4 weeks) = $25 × 2 = $50

Step-by-Step Calculation Process

Determine the employee's regular hourly or weekly wage
Identify the total notice period length (in weeks)
Calculate how many weeks of notice the employee did not complete
Multiply the regular wage by the total notice period
Divide the uncompleted portion by the total notice period
Multiply the results from steps 4 and 5 to get the PILON amount

Note: In Ontario, the minimum PILON is typically calculated based on the employee's regular wages, but employers may agree to pay more. Always check the employment contract for specific terms.

Ontario-Specific Considerations

Ontario has specific laws governing notice periods and PILON calculations:

Employees with less than 6 months of service are entitled to 1 week's notice
Employees with 6 months to 2 years of service are entitled to 2 weeks' notice
Employees with more than 2 years of service are entitled to 4 weeks' notice
Employers must pay PILON at the employee's regular rate of pay
PILON must be paid in addition to any severance pay

Common Law vs. Employment Standards

In Ontario, common law principles may apply for notice periods longer than those required by the Employment Standards Act. Employers should consider both the statutory minimum and any contractual agreements when calculating PILON.

Common Scenarios

Scenario	Notice Period	Uncompleted Portion	PILON Calculation
Employee with 1 year service	4 weeks	2 weeks	$25/hour × 4 weeks × (2/4) = $50
Employee with 6 months service	2 weeks	1 week	$20/hour × 2 weeks × (1/2) = $20
Employee with 3 months service	1 week	0.5 weeks	$18/hour × 1 week × (0.5/1) = $9

These examples assume regular hourly wages. For salaried employees, the calculation would be based on their weekly salary instead.

FAQ

How is PILON calculated in Ontario?

In Ontario, PILON is calculated by multiplying the employee's regular wages by the length of the notice period they did not complete. The result is then divided by the total notice period to determine the final amount.

What is the minimum notice period in Ontario?

The minimum notice period in Ontario depends on the employee's length of service: 1 week for less than 6 months, 2 weeks for 6 months to 2 years, and 4 weeks for more than 2 years.

Can employers pay more than the minimum PILON?

Yes, employers can agree to pay more than the minimum PILON amount, but they cannot pay less than the legally required amount based on the employee's regular wages and notice period.

Is PILON taxable in Ontario?

Yes, PILON is considered wages and is subject to income tax, CPP, and EI deductions in Ontario.

What happens if an employer refuses to pay PILON?

If an employer refuses to pay PILON, the employee may be able to take legal action to recover the unpaid wages. It's important to document all communications and keep records of the notice period.