In an Employment contract between the employee and employer, the termination clause states a clause on Pilon i.e, payment in lieu of the notice period. This can come into picture in two situations.
When the employee resigns and does not want to serve the notice period as per his employment agreement. The employee can serve a short notice period and pay the employer for the notice not served.
Second scenario can be when the employer terminates the employee and then the employee can demand the salary in lieu of the short notice period from the employer.