What pay includes
Lump sum payments
Payments on retirement or leaving work
You might choose to pay a lump sum payment to an employee who is retiring or leaving work. This payment should be treated as pay if it is more than either:
Payment in lieu of notice
A payment in lieu of notice should be treated as pay if it is part of your employee's contract. This payment cannot benefit from tax exemption for termination payments.
Payments to compensate for change in work practices
Your employee may be entitled to a lump sum payment as compensation for changing duties. These payments are included as pay and taxed in the normal way.
Next: Salary sacrifice arrangements