Pay in lieu of notice

Pay in lieu of notice is the money you pay instead of letting an employee work out their notice period when you end their employment.

Also called: termination pay, payment in lieu, PILON, compensation for length of service

What pay in lieu of notice means

Pay in lieu of notice is what you pay an employee instead of giving them advance written notice of termination. "In lieu" just means "instead of". Rather than telling someone their last day is 4 weeks away and having them work those weeks, you end the job now and pay them what they would have earned.

Most provinces call the statutory version termination pay. British Columbia calls it compensation for length of service. Whatever the name, it meets the same minimum obligation as working notice.

How it works

Work out the notice the employee is owed, then pay the wages they would have earned in that time. For someone on a regular schedule this is their regular weekly wage times the number of weeks. For someone with variable hours, each province has its own way to set the weekly amount, so check yours before you calculate.

You can also mix the two. For example, you might give 2 weeks of working notice and pay the remaining 2 weeks in lieu. Many employers choose pay in lieu when the person handles cash, customer data or client relationships, or when having them stay would be awkward for everyone.

Pay in lieu replaces wages for the notice period, so think about everything else the person would have received. Benefits, vacation pay that would have accrued and regular commissions can all matter, and some provinces set specific rules for them. Common-law notice, where it applies, is also usually paid as damages for the whole package, not base wages alone.

Timing matters. Termination pay is part of what you owe when employment ends, and final pay deadlines differ by province. Paying late gives the employee a straightforward reason to file an employment standards complaint.

Pay in lieu of notice by province

The idea is the same across Canada, but the name and the payment deadline differ. These are rules we confirmed.

Where the work is done	The rule
Federal	Amounts owed on termination are due within 30 days; vacation pay within 30 days of the last day worked. Severance pay, where owed, is separate from pay in lieu.
British Columbia	The statutory amount is called compensation for length of service. Final wages, which can include it, are due within 48 hours after dismissal.
Alberta	Final earnings are due within 10 days after the end of the pay period in which employment ended, or 31 days after the last day of employment.
Ontario	Final pay is due by the later of 7 days after employment ends or the next regular pay day.

For other provinces, see the final pay deadlines on our employment standards page and confirm with the provincial office whether termination pay follows the same timing.

Example: Paying out notice at a Calgary dental office

Nadia runs a 9-person dental office in Calgary. She ends the employment of a receptionist who has worked there for 5 years, on a fixed schedule of 40 hours a week at $25.00 an hour. In Alberta, 4 to under 6 years means at least 4 weeks' notice.

Nadia decides the receptionist should not stay on, so she pays 4 weeks in lieu: 4 x 40 x $25.00 = $4,000.00 before deductions. She pays it with the final wages and vacation pay owed, inside Alberta's deadline, and gives a short letter explaining each amount.

Hollis handles the exit checklist

Hollis's exit checklist shows the final pay deadline for your province and the vacation pay owed, so pay in lieu goes out with everything else on time.

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Free tools and guides for this

Questions about pay in lieu of notice

Is pay in lieu of notice the same as severance pay?

No. Pay in lieu replaces the notice period. Statutory severance pay, where it exists (federally and in Ontario), is a separate amount on top of notice.

Can I give part notice and part pay in lieu?

Yes. You can combine working notice and pay in lieu, as long as the total adds up to at least the notice the employee is owed.

When do I have to pay termination pay?

It depends on the province, from 48 hours after dismissal in British Columbia to 30 days for federally regulated employers. Check your province's final pay deadline.

Official sources

General information for Canadian employers, not legal advice. Rules differ by province and territory and change over time, so check with your provincial employment standards office (or the federal Labour Program if you are federally regulated) before you rely on it. See employment standards by province.

Checked against official sources on 4 November 2026.