What garden leave is for
Garden leave exists to manage the practical risks of an employee continuing to work after being told they're leaving. The risks vary by role:
- Information leakage. A senior employee with knowledge of strategy, financials, or upcoming products has weeks of opportunity to share that with future employers.
- Customer migration. Salespeople or relationship-driven roles can effectively move accounts during notice if left in their seats.
- Team disruption. A demoralised lame-duck team member can be more disruptive than absent.
- Restrictive covenant timing. Non-compete clauses typically activate from termination. Garden leave gives the employer enforcement time during which you're still legally employed.
For these reasons, garden leave is concentrated in financial services, professional services (law, consulting), competitive sales, and any senior role where the relationships of the company are partly relational.
Your status during garden leave
You're still an employee:
- On payroll at full salary
- Accruing holiday entitlement
- Continuing pension contributions
- Continuing private healthcare, life insurance, and other benefits
- Bound by all contractual duties (confidentiality, non-compete, loyalty)
- Building service years for redundancy and statutory rights
You don't:
- Need to come to work
- Have access to systems, email or premises (typically removed on day 1)
- Get assigned tasks
- Attend meetings or events
For practical purposes you have time off at full pay. Many people use it productively for retraining, interviewing, or just resting.
Pay during garden leave
Full salary at your normal rate. The pay is taxed and NI'd as ordinary employment income.
For someone on £80,000 with a 3-month garden leave, the gross is £20,000 per quarter, taxed at marginal rate. If you've already used your basic rate band for the year, this all sits at 40% Income Tax + 2% NI = 42% combined.
Bonus and commission during garden leave
This is the area most often disputed:
- Contractual fixed bonuses: Usually paid pro-rata for the garden leave period
- Discretionary bonuses: Usually not paid (employer's discretion). Sometimes settlement agreements negotiate this
- Sales commission for deals closed before garden leave: Should be paid
- Sales commission for deals closing during garden leave: Disputed; depends on contract wording
- Long-term incentive plans (LTIPs, RSUs): Specific scheme rules apply. Often a "good leaver" or "bad leaver" treatment kicks in
The bonus question often determines whether garden leave is acceptable or whether you'd push for PILON.
Restrictions during garden leave
Your contractual duties continue:
- Confidentiality: You can't share confidential information with a new employer or anyone else
- Non-compete: You can't work for a competitor (the contractual non-compete is reinforced by the fact you're still employed)
- Non-solicit: You can't approach customers, colleagues, or suppliers to follow you
- No new employment: You can't be employed elsewhere — including formal freelance work for competitors
Many employers also impose:
- Return of equipment (laptop, phone, security passes) at the start of garden leave
- No contact with clients or colleagues except via designated channels
- Cooperation with handover requests during garden leave
The restrictions are wide. Don't accept consulting work or formal freelance roles during garden leave without specific clearance — even one engagement can void the garden leave and potentially trigger restrictive covenant claims.
Garden leave vs PILON vs working notice — comparison
| Factor | Working notice | Garden leave | PILON |
|---|---|---|---|
| Working | Yes | No | No (employment ended) |
| Pay flow | Monthly salary | Monthly salary | One lump sum |
| Start new job | At end of notice | At end of notice | Immediately |
| Pension contributions | Continue | Continue | Lump sum, no contributions |
| Service continues | Yes | Yes | No |
| Tax treatment | Salary | Salary | Salary (one period — sometimes higher tax band) |
| Employer cost | Salary + benefits + pension + holiday | Same as working notice | Cash lump only |
| Restrictive covenants | Active employment period | Active employment period | Post-employment period |
The big practical difference for you: working notice and garden leave preserve service and pension contribution flow, but lock you out of starting a new role; PILON ends employment immediately but caps the tax-year position.
Holiday during garden leave
Many employers require holiday to be used during garden leave rather than paid out. This is allowed under the Working Time Regulations if the employer gives proper notice. The result:
- You can't take a long holiday during garden leave and then claim the same days as accrued leave at termination
- Holiday used during garden leave is paid as normal monthly salary, not as a separate cash payment
If you have substantial unused leave (e.g. 4 weeks accrued), most of it will be consumed by garden leave rather than paid out.
Common pitfalls
- Using social media or contacting clients. Garden leave employees often slip — a LinkedIn post about "exciting next chapter" or a coffee with a key client during garden leave can be a contractual breach. Many people get sued at this point.
- Accepting consulting work. Even paid consulting for non-competitors during garden leave is often prohibited by the employment contract.
- Returning company equipment late. Some contracts trigger deductions or claims for delayed return of laptops, phones, security passes.
- Forgetting to claim accrued benefits. Some private health coverage, life insurance, and similar benefits continue but require active selection at termination. Don't assume they auto-continue.
- Missing pension contribution opportunities. A garden leave period straddling tax-year end can be valuable for pension optimisation. Discuss with your pension provider before termination.
When to refuse garden leave
You can rarely "refuse" — if your contract gives the employer the right, garden leave is their call. But you can push for alternatives:
- PILON instead, if you have a new job lined up and want to start
- Reduced restrictive covenants in exchange for accepting garden leave
- Pro-rata bonus or LTIP treatment in a settlement agreement
- Cleaner notice handling if the garden leave clause is silent on benefits
These are settlement-agreement negotiating points. Most contracts give the employer broad discretion; the negotiating moment is when the redundancy offer is being finalised.
Practical checklist
When garden leave is announced:
- Get the start and end dates in writing. Garden leave should have explicit boundaries.
- Verify pay continues unchanged. Same gross, same deductions, same payment date.
- Confirm benefits continue. Healthcare, pension, life insurance, share schemes all need explicit confirmation.
- Plan for restrictive covenant timing. Non-compete clauses likely activate from your termination date — note when that is.
- Don't engage in conduct that could void the leave. No competitor contact, no consulting work, no client outreach without specific written clearance.
In short
Garden leave keeps you employed and paid in full but away from work. It's used where there's competitive risk in you continuing in your role. Pay, tax, and benefits are identical to working notice. The trade-off vs PILON is that you can't start a new role until notice expires. For the broader redundancy context, see the redundancy hub.