Garden Leave: Meaning, How It Works, Benefits & Drawbacks

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When an employee resigns, you must act quickly to protect your business, confidential information, and client relationships during the notice period. Even a short window of unrestricted access can put your organization at serious risk.

Garden leave helps you do that by keeping the employee on payroll while restricting them from working until their employment officially ends. In this guide, you'll learn what garden leave is, how it works, its benefits, legal considerations, and HR best practices.

What Is Garden Leave?

Garden leave is a period during which an employee is still officially employed and paid but is asked not to work. During this time, the employee continues to receive their salary and benefits while being restricted from accessing company systems, contacting clients, or joining a competitor until their employment officially ends.

This period of time gives you time to reassign responsibilities, secure company assets, and minimize the risk of disruption before the employee's departure. Throughout this period, the employee remains bound by the terms of their employment contract, including confidentiality and other applicable obligations.

Benefits and Drawbacks of Garden Leave

Before implementing garden leave, it's important to weigh its advantages and potential challenges to determine whether it's the right approach for your business.

Benefits	Drawbacks
Protects confidential information and business data.	You must continue paying the employee during the leave period.
Reduces the risk of losing clients to competitors.	It can increase costs, especially for senior employees.
Gives you time to transfer work and plan a smooth handover.	Employees may lose engagement while away from work.
Prevents access to company systems and sensitive information.	It may not be enforceable without a clear employment contract.
Helps maintain business continuity during employee transitions.	Laws vary by country and region, making compliance more challenging.
Reduces conflicts of interest when employees join competitors.	Managing payroll and compliance can add to your HR workload.

How Garden Leave Works

Once you decide to place an employee on garden leave, following a structured process helps you protect your business, ensure legal compliance, and manage a smooth transition.

Step 1: Receive or Issue Notice

The process begins when an employee resigns or you decide to terminate their employment. At this stage, you review the employment contract to determine whether a garden leave clause applies. If it does, you can initiate garden leave as part of the employee's notice period while planning the transition.

Step 2: Notify the Employee

Once you've decided to place the employee on garden leave, provide a formal written notice explaining the arrangement. Clearly mention the duration, the employee's responsibilities, employee compensation, and any restrictions, such as not performing work, accessing company systems, or contacting clients. This helps avoid confusion and ensures both parties understand their obligations.

Step 3: Secure Company Assets and Access

After issuing the notice, remove the employee's access to company email, internal systems, cloud applications, and other business resources. Collect company-issued devices, ID cards, and other assets where appropriate. Acting quickly at this stage helps protect confidential data and reduces the risk of unauthorized access and data exfiltration.

Step 4: Continue Salary and Benefits

Throughout the garden leave period, continue paying the employee according to the employment contract. This typically includes basic salary, benefits, and any other contractual entitlements. Although the employee is not actively working, they remain employed until the agreed end date.

Step 5: Manage Compliance with Employment Terms

During garden leave, make sure the employee follows the conditions included in their employment contract. Depending on your agreement, they may be prohibited from moonlighting, contacting clients or colleagues for business purposes, or sharing confidential information. Monitoring compliance helps protect your business interests throughout the notice period.

Step 6: Complete the Offboarding Process

Once the garden leave period ends, finalize the employee's departure. Process final payments, confirm the return of company property, deactivate any remaining accounts, and complete all required HR documentation. If applicable, post-employment obligations such as confidentiality or non-compete clauses continue according to the employment contract.

Garden Leave by Country and Region

Garden leave laws vary significantly by jurisdiction. The regions below show where garden leave is most commonly used, what the legal framework looks like, and how employers typically implement it. If you manage employees across multiple countries, you should design your garden leave policies to comply with the strictest applicable employment laws.

United Kingdom

The UK is the origin and most established market for garden leave. Courts generally enforce reasonable garden leave periods, typically up to 12 months for very senior roles. During this period, employees continue receiving their full salary and benefits, making garden leave a balanced way to protect both employer and employee interests.

United States

Massachusetts became the first U.S. state to formally require a "garden leave" provision in certain noncompete agreements. Under the new law, when an employee leaves a company but is restricted from working for a competitor, the former employer must generally pay at least 50% of the employee's base salary during the noncompete period.

India

Garden leave is a growing practice in India's IT, finance, and consulting sectors, especially for senior employees moving to competitors. If you include garden leave in the employment contract, Indian employment law generally allows you to implement it. Garden leave periods of 3 months are common, with employees continuing to receive their salary and benefits throughout the period.

Legal Considerations Before Using Garden Leave

Before placing an employee on garden leave, you should confirm the arrangement complies with your employment contract and applicable labor laws. Since employment regulations vary by country and region, reviewing the legal requirements beforehand can help you avoid disputes and protect your business interests.

1. The Clause Must Exist in the Contract

You should include a garden leave clause in the employee's employment contract before relying on it. Without a contractual provision or mutual agreement, requiring an employee to remain away from work during the notice period may not be legally enforceable. Learn more about HR compliance challenges and how to avoid them.

2. The Length Must Be Reasonable

The duration of garden leave should be reasonable and appropriate to the employee's role and the level of business risk. A garden leave period that is too long may be challenged if it unfairly restricts the employee from pursuing new job opportunities.

3. Full Compensation Is Mandatory

If you place an employee on garden leave, you should continue paying their salary and provide any contractual benefits throughout the leave period. Since the employee remains employed, you are generally expected to honor the terms of the employment agreement until it officially ends.

4. Restrictions Must Be Clearly Defined

Clearly outline any restrictions that apply during the garden leave period. These may include limitations on accessing company systems, contacting clients, sharing confidential information, or working for another employer. Well-defined terms help avoid misunderstandings and make disciplinary action easier to enforce if violations occur.

Garden Leave vs Notice Period vs PILON vs Severance

Although these terms are often used in a similar way, they serve different purposes during an employee's departure. Understanding the differences helps you choose the right approach based on your business needs, legal obligations, and the level of risk involved.

Aspect	Garden Leave	Notice Period	PILON (Payment in Lieu of Notice)	Severance Pay
Employment Status	Employee remains employed	Employee remains employed	Employment ends immediately	Employment has already ended
Employee Works?	No	Yes	No	No
Salary & Benefits	Receives full salary and benefits throughout the leave period	Receives regular salary and benefits while working	Receives a lump-sum payment instead of working the notice period	Receives a one-time payment after employment ends (if eligible)
Access to Company Systems	Usually revoked immediately	Typically retained unless restricted	Revoked immediately	Revoked after employment ends
Main Purpose	Protect confidential information, client relationships, and business interests	Allow the employee to complete work and hand over responsibilities	End employment immediately while meeting notice pay obligations	Provide financial support after termination or layoff
Typical Duration	Matches the contractual notice period	Defined in the employment contract	No notice period is worked	Depends on company policy, contract, or local labor laws
Best Suited For	Senior executives, key employees, or employees with access to sensitive information	Most resignations and standard terminations	Immediate exits due to business or operational needs	Employees eligible for severance under company policy, employment contracts, or applicable labor laws.
Can an employee join another employer?	Usually, no, until the garden leave period ends	Generally, no, unless approved by the employer	Yes, after employment officially ends (subject to any post-employment restrictions)	Yes, after employment officially ends (subject to any post-employment restrictions)

Frequently Asked Questions

Quick answers to the questions people ask most

Can an employee take another job while on garden leave?

Employees typically cannot take another job while on garden leave because they are still employed by their current organization. This restriction is usually outlined in the employment contract and helps protect the employer’s interests. However, in some cases, exceptions may be allowed if both parties agree.

What if my employee refuses to go on garden leave?

If your employee refuses to go on garden leave, the first step is to check whether your employment contract includes a clear garden leave clause. If it does, you generally have the right to enforce it, as long as you continue to meet your obligations, such as paying salary and benefits. If there is no such clause, you may need to negotiate and reach a mutual agreement with the employee.

Does garden leave affect annual leave or vacation days?

This depends on your employment contract and local labor laws. In some organizations, employees may be required to use accrued annual leave during the garden leave period, while others allow it to be taken or paid out separately.

Which employees are usually placed on garden leave?

Garden leave is most commonly used for senior executives, managers, sales professionals, and employees who have access to confidential information, key clients, or strategic business data. It may also be applied to employees involved in sensitive projects or those transitioning to competitors.

What happens if an employee violates the terms of garden leave?

If an employee violates the agreed restrictions, such as sharing confidential information or working for a competitor, you may be able to take disciplinary or legal action, depending on the employment contract and applicable laws.