… a sitting Prime Minister loses his seat at a General Election and an MP in a ‘safe seat’ has to stand aside to allow the Prime Minister to stand at a bye-election and thereby get elected? I’m thinking particularly about the amount of money involved. The newly-elected MP would lose around four years of salary and expenses? Is he/she compensated for that loss, or not? It has happened at least once in the past, but I cannot remember when.

Interesting.
But if this rare occurrence should happen, then I don’t think the PM in question would last long as not having the confidence of the voters he or she would not have the confidence of the cabinet.
Unless the party be Labor