Alexander Boswell, Marketing MSc, Business PhD and SaaS mastermind has got a pretty good grasp of business concepts – at least he thought he did until he decided to leave the corporate world and was given PILON, a term he misunderstood for garden leave. When he sought to clarify this misinterpretation, he found he wasn’t the only one with a tonne of questions. Thus, he endeavours to answer every query and doubt surrounding the subject in this comprehensive guide.
Redundancies have hit record highs of 314,000 so far this quarter. As a result, Garden Leave (or Gardening Leave) is a term you may have had to make uncomfortable acquaintances with if you or your company are facing tough times.
If you’re an employee and you’ve handed in your notice (or the company has dismissed you), you may also see this kind of term in your contract and wonder what it is.
So what is garden leave? Here, we’ve provided a quick and easy guide to help you better understand the process as it is in the UK.
Garden Leave (or Gardening Leave) describes a contractual clause upon resignation or otherwise dismissed employee. It typically instructs the employee to remove themselves indefinitely from the work environment, cease responsibilities of their role and to not make contact with other employees, suppliers, advertisers, clients or customers for the remainder of their employment– all whilst remaining on the company payroll.
In not-so legalese terms, the employee serves a ‘notice period’ away from work and off the clock, with full pay.
PILON is short for a payment in lieu of notice, ‘In lieu’ here meaning ‘instead of’. So instead of serving their notice period, an employee will get paid a lump sum at an amount equal to what they would have earned throughout their notice period. So if their contract states a notice period of 4 weeks, they will receive immediate compensation of a month’s pay upon termination.
There is a key difference between garden leave and PILON – an employee who receives PILON is free to go straight into other employment. This is because they have been paid off in full and so are no longer technically an employee at that establishment – whereas someone on garden leave continues to be employed until the end of their notice period, and will be paid pro-rata (as a salary or wage stipulated in their contract).
If you’re not sure where or what to look for in a contract, Law Insider provides some sample clauses for garden leave. These should help you determine if your agreement has one, or, if you’re an employer, aid you in creating your own clause or policy for new employees.
An employer looking to place an employee on a period of garden leave must have an express or non-compete clause (see garden leave clause example below) in the employment contract prior to it being signed.
Without an express contractual clause, you may find that the employee’s right to work (as well as be paid) is upheld in court.
Employers can use restrictive covenants or a non-compete clause (often abbreviated to ‘non-competes’) for post-termination contractual obligations. The primary purpose of these covenants, similar to garden leave, is to protect inside information such as business contracts, key clients or suppliers, or otherwise confidential information.
What’s different about this type of clause is that they apply after termination. That means they can apply after garden leave to extend the protection of ‘legitimate business interests’ such as trade secrets being shared. The obvious benefit of this additional clause is that it’s at no cost.
One type of restrictive covenant, the non-compete clause, helps ensure that parting employees cannot begin working for a rival company or within a similar profession or trade that is in direct competition with their former place of work.
Garden leave and post-termination restrictions are not mutually exclusive and can be used together for maximum effect. But, in practice, it’s super important that they don’t go beyond what is reasonably necessary to protect ‘legitimate business interests’. Otherwise, you might find the clauses become unenforceable and may even have a breach of contract or employment rights.
Understanding your rights as an employee is an important aspect of working, but how does this help those working outside of the legal world?
The UK Employment Law Certification programme is a great course for anyone both within and outside the legal world, particularly those in human resources roles.
The duration of garden leave tends to reflect that of the notice period stated in your contract. Thus, garden leave can last anywhere from a week to three months and, in some cases, high-level executives will be expected to give a whole year’s notice. During this time, the person on leave is still fully employed, meaning they get full pay and contractual benefits such as pension payments or medical plans. On the other hand, they are not permitted to begin new employment during this period, something this stockbroker had to learn the hard way.
Before going into anything, it’s best to have the full picture; the good and bad, for and against.
Companies typically reserve garden leave for executives or other high-level senior employees that handle confidential company information.
That’s not to say employers can’t use them for all employee contracts though. For example, if the company is small and works in a highly competitive niche industry with lots of confidential information at risk, having a garden leave clause would help protect highly valuable information. Think tech startups, information security firms, specialist types of journalism or those who work within politics.
You might have gotten to this point and thought “I’m all clued up”. Or, you may have skimmed over most of this, frown still intact. If so, here are some key questions and their answers in short, for those of you who hate nuance.
Not necessarily and not usually but it depends on the manner in which you’re leaving the job.
Between one week and one year. Usually, it is the length of the notice period stipulated in the employment contract. Yet, with exceptionally long notice periods, say more than six months, the employer may be unable to legally enforce garden leave for the full period, as it isn’t necessary to protect the legitimate interests of the employer.
You can request or suggest anything, but you’re only entitled to it if stated so in your contract.
Short answer: yes.
No, garden leave is paid as per your usual pay period. In most people’s cases, monthly.
No. A suspension happens in select cases, either due to medical/health and safety reasons or as part of a disciplinary procedure (investigation). A suspension can be paid or unpaid.
Staff are placed on furlough with the intention of them returning to work after their period of leave and may only get 80% of their salary (but can get paid fully) during that time. Staff on garden leave will not return to work after this period and will get paid in full.
Short answer: Pay in lieu of notice is paid upfront as a lump sum and allows employees to move straight onto new employment instead of serving their notice period. Garden leave, by contrast, requires employees to serve their full notice period and whilst getting paid pro-rata as per their usual pay period.
Yes, but you’ll need your employer’s consent.
If you need to write a letter to an employee to notify them of garden leave, there’s a helpful template here.
So hopefully you’re all up to speed on what garden leave is and everything that comes with it, including the potential advantages and drawbacks. You should know that garden leave is not the end of the world, in fact, it can be a positive thing – either way, you should now have more confidence and understanding of your options moving forward.
Nevertheless, not every situation is the same and it might look different to you depending on your circumstances. For that reason, it’s always important to get advice specific to your case.
This article is for informational purposes only; it should not be considered Financial or Legal Advice. Please consult a legal professional before making any significant financial or legal decisions.
It is easy to overlook the importance of contract management because it seems to be a tedious, mundane topic. Contracts, however, are the basis of most business and employee relationships. If contracts are managed well, the relationship will flourish. If they are not, companies face financial loss, relationship harm, and damaged reputations.
This post was last modified on 29 March 2021
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