Final Pay on Dismissal
What final pay are you entitled to when dismissed? Understand notice pay, holiday pay, and other payments owed.
Last updated: 30 January 2025
Understanding your final pay entitlements ensures you receive everything you're owed when employment ends.
Components of Final Pay
What You Should Receive
| Component | When Applicable |
|---|---|
| Salary to termination date | Always |
| Notice pay or PILON | Unless gross misconduct |
| Accrued holiday pay | Always |
| Outstanding expenses | If any owed |
| Commission | If earned |
| Bonus | Depends on contract terms |
| Redundancy pay | If made redundant (2+ years) |
What May Be Deducted
- Tax (PAYE)
- National Insurance
- Pension contributions
- Authorised deductions (contract)
- Court orders (child support, etc.)
Salary to Termination Date
Calculation
Pro-rata salary for days worked:
Annual salary ÷ 12 = monthly salary Monthly salary ÷ working days in month × days worked
Example
Employee on £36,000/year, dismissed on 15th of month:
- Monthly salary: £3,000
- Days in month: 22 working days
- Days worked: 11
- Due: £3,000 ÷ 22 × 11 = £1,500
Notice Pay
If Working Notice
Receive normal pay throughout notice period, including:
- Basic salary
- Usual benefits
- Normal deductions
Payment in Lieu of Notice (PILON)
If dismissed with PILON instead of working notice:
| With PILON clause | Without PILON clause |
|---|---|
| Basic salary for notice period | Full value of notice |
| As specified in contract | May include benefits |
| Fully taxable | Potentially tax-free element |
No Notice (Gross Misconduct)
If dismissed for gross misconduct:
- No notice pay due
- Dismissal takes immediate effect
- Still entitled to other payments
Holiday Pay
Accrued but Untaken
You're entitled to pay for:
- Holiday accrued but not taken before dismissal
- Holiday that would have accrued during notice (if not working it)
Calculation
- Calculate total year's holiday entitlement
- Calculate how much accrued by leaving date
- Subtract holiday already taken
- Pay for remaining days
Example
- Full year entitlement: 28 days
- Leave date: 30 September (9 months)
- Accrued: 28 × (9/12) = 21 days
- Already taken: 15 days
- Owed: 6 days
Daily Rate
Holiday pay daily rate:
- Weekly pay ÷ number of days worked per week
- Or annual salary ÷ 260 (standard working days)
Bonus Payments
Depends on Contract
Bonus entitlement depends on:
- Contract terms
- Scheme rules
- Whether you must be employed on payment date
- Whether bonus has been "earned"
Common Scenarios
| Situation | Likely Outcome |
|---|---|
| Bonus declared before dismissal | Usually payable |
| Must be employed at payment date | May lose entitlement |
| Performance bonus earned | May have good claim |
| Discretionary bonus | Employer has discretion |
Challenging Lost Bonus
If you believe you're entitled:
- Review contract and scheme rules
- Check for breach of contract
- Consider whether dismissal timing suspicious
- Seek legal advice
Commission
Earned Commission
Commission already earned:
- Should be paid
- Even if dismissed before payment date
- Calculate commission to termination date
Future Commission
Commission on deals in progress:
- Depends on contract terms
- May be entitled to pro-rata
- Or may lose pipeline deals
- Check contract carefully
Redundancy Pay
If Made Redundant
With 2+ years' service, entitled to statutory redundancy:
| Age | Entitlement |
|---|---|
| Under 22 | 0.5 week per year of service |
| 22-40 | 1 week per year |
| 41+ | 1.5 weeks per year |
Subject to:
- Maximum 20 years' service counted
- Weekly pay cap (£700 in 2024-25)
Enhanced Redundancy
Contract may provide:
- Higher multiple
- No weekly cap
- Additional payments
Expenses
Outstanding Expenses
Should be reimbursed:
- Business expenses already incurred
- Even if claim submitted after leaving
- As long as legitimate and documented
Expense Claims
Submit any outstanding claims promptly:
- Before leaving if possible
- Keep receipts and evidence
- Follow normal process
When Final Pay Is Due
Timing
Final pay should be:
- Processed in normal payroll cycle
- Paid on next regular pay date
- Not unreasonably delayed
If Delayed
If employer unreasonably delays:
- May be unlawful deduction from wages
- Tribunal claim possible
- Interest may be payable
Typical Timeline
- Dismissal on 10th of month
- Normal pay date 28th of month
- Final pay should be 28th
Deductions from Final Pay
Authorised Deductions
Employers can deduct:
- Statutory deductions (tax, NI)
- Contractually agreed amounts
- Written consent given
- Previously overpaid amounts (with care)
Common Contractual Deductions
| Deduction | Typical Scenario |
|---|---|
| Training costs | If leaving within payback period |
| Equipment | Unreturned company property |
| Loans | Outstanding employee loans |
| Uniforms | Unreturned or damaged |
Must Be Authorised
Deductions only valid if:
- Required by law (tax/NI)
- Authorised by contract
- You've given written consent
- Properly notified
Challenging Deductions
If you disagree with deductions:
- Request written explanation
- Check contract allows it
- Challenge if unauthorised
- May be unlawful deduction claim
Tax Treatment
What's Taxable
| Payment | Tax Treatment |
|---|---|
| Salary | Fully taxable |
| PILON (contractual) | Fully taxable |
| Holiday pay | Fully taxable |
| Bonus/commission | Fully taxable |
| Statutory redundancy | Tax-free |
| PILON (non-contractual) | First £30,000 may be tax-free |
Tax-Free Allowance
For termination payments:
- First £30,000 can be tax-free
- Includes non-contractual PILON
- Includes compensation for loss of employment
- Does not include contractual payments
P45
Employer must provide P45:
- On or before last pay date
- Shows tax paid in year
- Needed for new employer
Your Payslip
Check Final Payslip
Final payslip should show:
- Gross pay breakdown
- All deductions itemised
- Holiday pay separately
- Net pay
Discrepancies
If amounts seem wrong:
- Query with payroll/HR immediately
- Request breakdown
- Check calculations yourself
- Escalate if not resolved
Checklist
Before Leaving
- Submit expense claims
- Query any expected payments
- Check holiday balance
- Understand bonus position
- Know when final pay due
After Receiving Final Pay
- Check all components received
- Verify holiday pay correct
- Query any unexpected deductions
- Keep payslip for records
- Ensure P45 received
If Something's Missing
- Query with former employer
- Put concerns in writing
- Give reasonable time to respond
- Consider ACAS
- Tribunal claim if necessary
Related answers
Notice Pay on Dismissal
What notice must employers give when dismissing? Understand statutory and contractual notice, payment in lieu, and garden leave.
Holiday Pay Calculation UK: Employer's Guide
How to calculate holiday pay correctly for all types of workers. Includes irregular hours, part-time, overtime, and commission. Avoid underpayment claims.
Frequently Asked Questions
- What am I entitled to in my final pay when dismissed?
- Final pay typically includes: salary up to termination date, notice pay (unless gross misconduct), accrued holiday pay, any owed expenses, commission or bonus (depending on contract), and potentially redundancy pay.
- When should I receive my final pay?
- Your final pay should be processed on your normal pay date, or the next regular payroll run. Employers shouldn't unreasonably delay final pay. If there's a significant delay, this may be an unlawful deduction from wages.
- Can my employer withhold my final pay?
- Only in limited circumstances. They can make authorised deductions (tax, NI, pension) and contractually agreed deductions (e.g., for training costs, unreturned equipment). They cannot withhold pay as punishment or because of a dispute.