Garden leave: when to use it and how

Offering garden leave to employees departing the company gives employers valuable time to figure out their next step. This normally happens when a senior employee resigns, a business relationship changes, or redundancies are on the cards. However, it’s not necessarily the safest way to manage a departure. 

Arriving at the right decision depends on the employee’s contract, the risk they pose to the business by staying during their notice period, and what the organisation needs to protect.

The options for managing the departure of an employee include keeping someone employed but away from the business, enacting payment in lieu of notice (PILON) i.e. paying them to leave immediately, or having them work through their notice period. 

Garden leave is often used to protect confidential information, client relationships, and commercially sensitive knowledge, but getting the decision wrong can create a contractual dispute instead.

Also known as gardening leave, this is when a worker remains employed during their notice period but is instructed not to work, or to work only in a restricted capacity, while continuing to receive full pay and benefits.

This option is used when employment ends and the employee doesn’t need to work their notice period, but is paid for it instead.

This is when the employee continues to perform their usual duties until their employment ends.

The distinction between these three options matters, because each one gives the employer a different balance of control, continuity, and cost.

Take a look at the table below for a concise and accurate overall picture of what each option offers, to make an informed decision every time.

Consideration	Garden leave	Payment in lieu of notice (PILON)	Worked notice
Employment status	Continues until the notice period ends.	Normally ends immediately.	Continues until the notice period ends.
Pay and benefits	Continue under the original contract.	Payment depends on the contract or agreement, including applicable benefits.	Continue under the original contract.
Access to systems and clients	Likely to be restricted.	Normally withdrawn when employment ends.	Usually continues as needed for the role.
Knowledge transfer	Can be arranged before access is restricted.	Is generally completed before departure or through an agreed arrangement.	Can take place throughout the notice period.
Immediate start with a competitor	Generally prevented from working elsewhere if contract restricts this during garden leave.	Employment ends immediately, subject to any enforceable post-termination restrictions.	Usually unavailable until employment ends, subject to contractual terms.
Most suited for	Protecting relationships, information, and business continuity during notice.	A clean, immediate separation.	Handover, project completion, and continuity.

It’s important to be aware that these options are subject to the employee’s contract, the circumstances of the departure, and any agreement made with the employee. An employer shouldn’t assume it can impose garden leave or PILON without the appropriate contractual provision or the employee’s agreement.

Applying garden leave works when an employee’s continued presence in the business could potentially create some sort of risk to the company, yet the employer wants the employment relationship and contractual obligations to continue until the agreed leaving date. There are several situations where this can make commercial sense:

1. A senior employee is moving to a competitor. The employee currently has access to valuable pricing strategies, product development plans, and future commercial negotiations. If they continue to work while preparing to leave, it creates a risk of them transferring this commercially sensitive information to a competitor. Putting the employee on garden leave will restrict their access during their notice period, while helping to protect confidential information.

2. A valued employee, about to depart, has built up hugely important relationships with clients that the business needs to transfer to colleagues. Having the employee take garden leave prevents further client contact, thus giving the organisation the time to arrange a controlled handover and communicate the change to customers.

3. An exiting employee has access to internally sensitive information. For HR leaders, it’s worth considering using garden leave so that this vital information doesn’t spill out into the rest of the workplace.

4. The departure of an employee coincides with organisational change, with the senior employee holding knowledge that’s critical to the organisation’s future. Garden leave can form part of a carefully managed exit, although it shouldn’t replace a proper knowledge-transfer plan. A report from Careerminds discovered that 32.9% of HR professionals said their organisation had lost critical skills when making people redundant, serving as a reminder that protecting the business isn’t just about restricting access, but also about retaining the knowledge the organisation needs.

It must be stated that garden leave isn’t appropriate for every senior departure. If the employee is trustworthy, their work remains valuable, and there is scant competitive or confidentiality risk, giving worked notice will probably be more productive. If an immediate separation is essential and the contractual arrangements support it, PILON becomes the more straightforward option.

The decision should be based on the actual business risk, not the employee’s seniority or the fact that they’re leaving.

Before putting an employee on garden leave, you must be certain that their contract gives you the right to do so. This is the most important legal consideration for employers. A garden leave clause typically reserves the employer’s right to ask an employee not to attend work, not to perform duties, or not to contact clients for the rest of their notice period.

If there’s no clause, an employer that prevents an employee from working will be breaching the terms of the employment contract. Depending on the circumstances and the seriousness of the breach, this can amount to a repudiatory breach, which the employee can accept as bringing the contract to an end. This then creates a potentially significant commercial problem where the employer is relying on the existing contract to protect its interests.

Garden leave shouldn’t be treated as a substitute for well-drafted employment contracts and restrictive covenants. Section 86 of the Employment Rights Act 1996 establishes minimum statutory notice periods, but doesn’t give employers the right to impose garden leave.

There should also be a distinction between restrictions during employment and the restrictive covenants that continue to operate after employment has finished. Enforceability depends on wording and circumstances, including whether restrictions go no further than reasonably necessary to protect a legitimate business interest.

The importance of clear contractual wording and legally enforceable rulings is illustrated by the case of Tillman v Egon Zehnder Ltd (2019). The Supreme Court considered that the wording of a post-termination non-compete clause was too broad in one respect, but ruled that the offending words could be removed while leaving the remaining restriction enforceable.

Once an employer has decided that garden leave is appropriate, it’s time to implement it consistently, lawfully, and with the least amount of disruption to the business. Having a clear process reduces uncertainty for the departing employee, as well as for the colleagues who are taking over their responsibilities.

Check the garden leave clause, the notice period, any PILON provisions, confidentiality obligations, restrictive covenants, benefits, and holiday terms. Do you have the right to impose garden leave? If that clause is absent or ambiguous, seek out legal advice before going any further.

Decide if the main concern is client relationships, access to sensitive data, competitor activity, business continuity, or something else. This will help to determine whether full garden leave is necessary or if a narrower arrangement would achieve the same objective.

Identify key contacts, outstanding projects, important deadlines, decision-making responsibilities, and information that needs to be transferred. Arrange a handover before restricting access to systems, documents, and clients.

In a letter, explain the start date, expected leave date, whether the employee must remain available, what work or contact is permitted, how benefits and holiday will be handled, and who will be on hand to answer questions.

Coordinate IT, HR, security, and relevant line managers so they’re all on the same page. Restrict access where there’s a legitimate reason, and ensure that the departing employee understands the rules around confidential information, client contact, company equipment, and communicating with colleagues. These measures should be appropriate to the individual’s role and the risks involved.

Circumstances can change, especially during longer notice periods. Acas suggests checking whether the contract allows for flexibility and obtaining agreement before changing the arrangement.

Garden leave isn’t the same as suspending or firing an employee. The employee is still employed by the company, and their contract will continue to function throughout the notice period. So what does this mean in practice?

Employees on garden leave continue to receive contractual pay and benefits. Depending on the contract and benefits, this could include perks such as pension contributions, private medical insurance, or a company car. 

It’s worth paying close attention to bonus and commission arrangements. Check the scheme rules, the employment contract, and any conditions that are linked to being employed on a payment date, being actively at work, or meeting particular performance criteria. Placing someone on garden leave doesn’t automatically remove an entitlement. 

Because the employee is still employed, their continuing contractual obligations remain, including duties of fidelity and confidentiality. The employee must act in accordance with their contractual obligations and not misuse confidential information. However, garden leave doesn’t give an employer complete control over an employee’s activities. 

The restrictions will depend on the contract, and employers should be particularly mindful if trying to prevent an individual from taking up other work where the contractual basis isn’t clear. Specify which duties are to continue, which activities are restricted, and who the employee should contact if they have any queries.

Because the employee remains employed during the notice period, holiday will build up in accordance with their statutory and contractual entitlements. Check how much holiday is owed, if there is any outstanding leave that can be taken during garden leave, and how any untaken entitlement will be handled when the employee finally leaves. Accrued statutory holiday which hasn’t been taken is normally paid when employment ends.

A senior-level argument, with regards to an implied right to work, arises with executive employees, particularly those whose professional standing, responsibilities, or remuneration are closely linked to their role. It’s worth pointing out that an employee doesn’t automatically receive a right to insist on performing their normal duties throughout the notice period. 

Equally, an employer shouldn’t assume that a gardening leave clause removes every contractual obligation relating to work, status, or responsibilities.

In some circumstances, the contract and the nature of the role will raise concerns regarding whether the member of staff has an implied right to work or whether preventing them from working could breach a contractual term. It’s especially relevant when the employee’s role depends on maintaining a professional standing, or where exclusion from work has consequences beyond the loss of day-to-day duties. 

With that said, senior-level garden leave should be reviewed carefully, particularly if the individual is a director, highly-paid executive, or someone whose professional reputation is central to their role.

This period should not be seen as a holiday, as the employee needs to remain available, comply with contractual obligations, and wait until their employment ends before starting a new role. An employee cannot start a new job during garden leave. But it’s also the ideal time to plan a new career path. 

For Careerminds’ participants, it takes, on average, 11.5 weeks to land a new role, so a long notice period can be used to update a CV, reconnect with their network, and prepare for interviews… all subject to contractual obligations, of course. For senior employees, structured outplacement support can help to turn an uncertain time into a focused job search.

It’s time to review your senior employees’ contracts, before you need to rely on them. Check whether the clauses on garden leave and PILON offer the flexibility you’d expect and remain relevant to the business today.