Ontario Pay in Lieu of Notice Calculator

When an employee is terminated without proper notice, they may be entitled to pay in lieu of notice (PILON) under Ontario employment law. This calculator helps you determine the correct PILON amount based on your employment details.

What is Ontario Pay in Lieu of Notice (PILON)?

Pay in lieu of notice (PILON) is a payment given to an employee when their employment is terminated without proper notice. In Ontario, PILON is calculated based on the employee's salary and the length of notice they would have received if the termination was proper.

The Employment Standards Act, 2000 (ESA) requires that employees receive proper notice of termination. If an employer fails to provide this notice, the employee may be entitled to PILON instead.

Under the ESA, the standard notice period for most employees is one week. However, employees with less than one year of service are entitled to at least one week's pay, while employees with one to two years of service are entitled to two weeks' pay.

How to Calculate PILON

The calculation of PILON depends on several factors, including the employee's salary, the length of service, and the type of termination. Here's the basic formula:

PILON = (Average Weekly Earnings) × (Notice Period in Weeks)

Where:

Average Weekly Earnings is calculated by dividing the employee's total earnings for the pay period by the number of weeks in that period.
Notice Period in Weeks is determined based on the employee's length of service.

Notice Periods Under Ontario Law

Length of Service	Notice Period
Less than 1 year	1 week
1 to 2 years	2 weeks
More than 2 years	4 weeks

For employees who have worked for more than two years, the notice period is typically four weeks. However, some employees may be entitled to additional notice under collective agreements or other employment contracts.

Example Calculation

Let's look at an example to illustrate how PILON is calculated. Suppose an employee has worked for 18 months and earns $2,000 per month.

Calculate the employee's average weekly earnings:
- Monthly earnings = $2,000
- Average weekly earnings = $2,000 ÷ 4.33 (average weeks in a month) ≈ $462
Determine the notice period:
- Since the employee has worked for less than 2 years, the notice period is 2 weeks.
Calculate PILON:
- PILON = $462 × 2 = $924

In this example, the employee would be entitled to $924 in PILON.

Frequently Asked Questions

What is the difference between PILON and severance pay?: PILON is a payment given in lieu of notice, while severance pay is a lump-sum payment made to an employee upon termination. PILON is typically calculated based on the employee's salary and notice period, while severance pay may be based on factors such as length of service, age, and position.
Can an employer refuse to pay PILON?: No, an employer cannot refuse to pay PILON if the employee is entitled to it under Ontario employment law. The ESA requires that employees receive proper notice of termination, and PILON is a way to compensate employees for the loss of notice.
Is PILON taxable?: Yes, PILON is generally considered taxable income by the Canada Revenue Agency. The amount of PILON paid to an employee will be included in their taxable income for the year in which it was received.
Can an employee negotiate a different PILON amount?: In some cases, an employee may be able to negotiate a different PILON amount, particularly if they have a collective agreement or employment contract that provides for additional notice or compensation. However, the standard PILON amount under Ontario law is based on the employee's salary and notice period.