When a senior hire resigns, UK employers often face a narrow dilemma: let them work out their notice with full access to clients, code and pricing — or pay them to stay away. Garden leave is the legal middle path. It keeps the employee on the payroll and out of the office, preserving confidentiality and client relationships while the engagement formally ends. This guide walks through the clause drafting, pay mechanics, legal limits and a worked UK example for a commercially sensitive exit.
What garden leave is — and what it isn't
Garden leave is a period during notice when an employee remains contractually employed but is told not to attend work, not to contact clients, colleagues or suppliers and not to access company systems. Salary and benefits continue and the length of service keeps accruing.
Two common confusions:
- Garden leave is not the same as pay in lieu of notice (PILON). Under PILON the employment ends immediately and the employer pays a lump sum; under garden leave the contract keeps running.
- Garden leave is not a post-termination restrictive covenant. Covenants bite after employment ends; garden leave sits inside the notice period.
Why UK employers choose garden leave
Four business drivers come up most often in UK boardrooms:
- Protecting live sales pipelines when a senior revenue-owner resigns to join a competitor.
- Keeping confidential information out of a rival's hands while a product launch or M&A transaction completes.
- Buying time to recruit, hand over and stabilise a client-facing portfolio.
- Strengthening the enforceability of later restrictive covenants — courts look at the combined notice and restriction period when judging reasonableness.
How to draft a garden leave clause that survives court scrutiny
The seminal UK ruling in William Hill Organisation Ltd v Tucker (1999) held that employers cannot simply refuse to provide work to a skilled employee unless the contract explicitly allows it. The practical effect: no express clause, no enforceable garden leave. A modern UK employment contract should include:
- An express right for the employer to require the employee not to attend work during all or part of the notice period.
- Preservation of all contractual pay and benefits during the leave.
- Restrictions on contacting clients, colleagues, suppliers and on accessing systems.
- A duty to remain available for genuine handover duties.
- An acknowledgement that outside work during the leave requires written consent.
Typical duration — and the judicial ceiling
Most UK garden leave sits between one and three months. At senior-executive level, six to twelve months is possible, but the courts will cut back clauses they see as disproportionate.
| Role seniority | Typical UK garden leave | Maximum upheld by courts |
|---|---|---|
| Individual contributor | 0–4 weeks | Rarely exceeds 1 month |
| Manager / team lead | 1–3 months | 3 months |
| Director / senior sales | 3–6 months | 6 months |
| C-suite, PLC board | 6–12 months | 12 months (with clear evidence of legitimate interest) |
Pay, benefits and tax treatment
During garden leave the employee continues to receive salary, pension contributions, private medical insurance, life cover and any other contractual benefits. Variable pay is more nuanced:
- Bonuses: eligibility depends on contract drafting; many clauses require the employee to be employed and not under notice on the payment date.
- Commission: paid on deals that complete during the period, unless the scheme rules say otherwise.
- Equity vesting: usually continues, subject to any clawback on bad-leaver grounds.
- Holiday: employers often require accrued holiday to be taken during garden leave to reduce the eventual payout.
For tax, garden leave income is treated as normal employment income and taxed via PAYE. There is no £30,000 tax-free exemption, which applies only to genuinely ex gratia termination payments.
Garden leave vs PILON vs restrictive covenants
| Feature | Garden leave | PILON | Post-termination covenant |
|---|---|---|---|
| Employment status | Continues | Terminated immediately | Already terminated |
| Pay | Regular salary and benefits | Lump sum | No payment required |
| Access to customers | Prohibited | Possible, subject to covenants | Restricted by covenant |
| Duration cap | Notice period length | Notice period length | Typically 3–12 months |
| Typical use | Senior or client-facing roles | Clean and immediate exits | Layered on top of garden leave |
Case study: a six-month exit from a London asset manager
A head of equity sales at a mid-tier London asset manager resigned to join a competitor in 2025. His contract included a six-month notice period, a garden leave clause and a six-month non-solicitation covenant. The employer placed him on garden leave from day one of notice, required him to take his accrued 18 days of holiday in the first month and credited commission only on trades that had settled before his notice started. The competitor could not onboard him formally until the garden leave ended. When he did start, the court considered the combined 12-month restriction on customer contact reasonable because the employer had produced evidence of a 90-day pricing cycle and specific named clients he had personally covered.
Common mistakes employers make
- Imposing garden leave without an express clause in the contract.
- Forgetting to specify holiday-during-garden-leave terms, leaving a large payout at the end.
- Over-reaching — a garden leave plus non-compete combined to 18 months is almost always scaled back by a court.
- Failing to pay bonuses that fell due during the period, triggering a breach claim.
- Letting the employee keep access to email or CRM "for handover" — in practice a back door to customer lists.
Frequently asked questions
Can an employee refuse to go on garden leave?
Only if the contract has no express right to impose it. Where the clause exists and is clear, refusal can amount to breach of contract.
Can I take another job during garden leave?
Usually no. Most clauses expressly prohibit outside work during the leave because the contract is still live.
Does garden leave cover the employer for every risk?
No. Confidential information the employee already has in their head is hard to protect by garden leave alone, which is why employers layer non-solicitation and non-compete covenants on top.
What happens to pension contributions?
They continue on the normal basis because the contract is still in force. The same applies to auto-enrolment obligations.
Is a garden leave period deducted from any later non-compete?
UK courts often factor garden leave into the overall reasonableness of a combined restriction, and may reduce the non-compete period accordingly. The drafting should anticipate this offset.
Conclusion
Garden leave is a commercial shield, not a punishment. Done well, it protects the business during a sensitive transition and prevents expensive covenant litigation later. Done badly, it triggers constructive dismissal claims and unhappy final weeks. If you are reviewing your own contract or offering one to a senior hire, compare the clause library against the pattern above — and benchmark UK roles and leaver packages on ScrollJob UK.
