Glossary · UK
What is PENP (Post-Employment Notice Pay)?
The fully taxable element of a termination payment that covers the unworked notice period.
Full Definition
Post-Employment Notice Pay (PENP) is the portion of a termination payment that represents basic pay for any notice period that the employee does not work. Introduced from 6 April 2018, PENP is fully subject to Income Tax and both employee and employer National Insurance — it does not benefit from the £30,000 tax-free redundancy exemption. HMRC provides a statutory formula for calculating PENP based on the contractual notice period, the number of days not worked, and the employee's basic monthly pay. In practice, genuine redundancy pay (over and above PENP) still benefits from the £30,000 exemption. Employers must identify and separately pay PENP under PAYE before distributing any tax-free redundancy sum. Employees should check that their employer has correctly separated PENP from genuine compensation.