What is garden leave and how does it work?

Leaving a company doesn’t always mean cleaning out your desk and jumping into job applications. In some countries—like the United Kingdom, Australia, and Germany—employees may receive compensation after departure. It’s called garden leave, a contractual clause that keeps them on the payroll but out of the workplace. 

Some nations embrace garden leave as a way to protect sensitive information, while others impose limits on employment agreements that restrict a person’s ability to work elsewhere. Whether you’re an employer looking to safeguard your business or an employee curious about your rights, understanding garden leave can help you manage work transitions with confidence.

In this guide, we’ll explain what garden leave is, why companies use it, and how it impacts business as usual.

What is garden leave?

Garden leave (sometimes called gardening leave) is a type of leave from work where an employee continues to receive their salary and benefits but must stay away from the workplace during their notice period. It typically covers the time between resignation or termination and the employee’s final official workday. Instead of continuing their duties, employees are paid as usual but lose access to company systems, clients, and colleagues.

Unlike traditional termination or severance, where the employee immediately exits the company, garden leave keeps staff on the payroll while they comply with non-compete agreements and other restrictive covenants. It’s common practice in industries like finance, law, and technology, where protecting intellectual property and client relationships maintains a competitive edge. 

Laws on garden leave vary by country. For example, gardening leave in the UK is officially part of employment law, allowing companies to enforce garden leave if it’s included in the employee contract. In contrast, in the United States, garden leave depends on state-specific laws governing non-compete agreements, including whether such clauses are legally binding. 

Reasons for garden leave

Companies don’t shell out full pay and benefits for nothing. Garden leave is a strategic move to protect an employer’s interests. Here are a few reasons companies include it in employment contracts: 

• Stay in control: During garden leave, employees are still under contract. That means management can instruct them to stay off internal systems, limit contact with clients and colleagues, and enforce confidentiality clauses. Employees should uphold professional standards—leaking information or engaging with competitors could be a breach of contract. 
• Maintain workplace morale: Employees who are checked out, disgruntled, or openly job-hunting bring down team morale. Removing them from daily operations during their notice period prevents negativity from spreading. 
• Protect sensitive information: Employees with senior or specialized roles often have access to trade secrets, financial data, and client lists, making them targets for poaching. Garden leave creates a buffer that reduces the risk of sensitive information reaching the competition. This time gap can make critical data outdated or less valuable by the time an employee re-enters the job market. 
• Restrict competitive moves: Departing employees aren’t just a poaching risk. They may start their own business and take clients and key strategies with them. By keeping them on the payroll, companies prevent immediate competition and ensure that non-compete clauses are enforceable after employment officially ends. 
• Ensure smooth transition: A sudden resignation or termination disrupts workflows, leaving teams scrambling. When garden leave is a pillar of absence management strategies, it lets employers quietly shift duties, onboard replacements, and create a seamless handover—all with the desired support (or lack of interference) from the outgoing employee. 

Pros and cons of garden leave

Is garden leave a bad thing? It depends on how employers and employees handle it. Although you do get paid on garden leave while businesses protect their interests, it also comes with financial and career trade-offs. 

Pros

• Protects business interests for employers: Garden leave ensures sensitive information and resources stay out of competitors’ hands. 
• Maintains market stability for organizations: When key employees leave, clients and investors may worry about disruption. Garden leave creates a buffer, giving employers time to transition accounts, reassure stakeholders, and prevent sudden shifts in their bottom line. 
• Provides financial security for employees: Whether an employee is terminated or resigns, losing employment creates financial strain. Garden leave ensures that they continue to receive salary and benefits during the notice period, giving them time to plan their next career move. 
• Built-in break for employees: Garden leave is a paid period of rest before starting the next professional chapter. Employees can use this time to recharge, build new skills, and explore new career opportunities. 

Cons

• Steep cost for organizations: Employers continue to pay employees who are no longer contributing. This can be a significant financial burden, especially for senior or high-level employees who will also receive severance packages. 
• Potential legal disputes against employers: If employment contracts don’t clearly outline the terms of garden leave, employees may challenge its use—especially in regions with strict employment laws. In some cases, employees may argue that garden leave is constructive dismissal, claiming that excessive restrictions or extended leave periods harm career progression or force them out of their role. 
• Career delays for employees: Employees are unable to start a new job immediately, even if they secured one, leading to lost opportunities.
• Limited professional growth for workers: With no active work responsibilities, employees might feel stagnant or disconnected from their industry. The extended leave of absence might make it challenging to re-onboard and re-adjust to the workforce. 

The impact of gardening leave on company culture

Garden leave isn’t inherently good or bad. Like any other company policy, it depends on how employers implement and communicate employment agreements.

Some employees see it as paid time off, while others might feel sidelined and disconnected from their profession. If handled poorly, it can create resentment, leaving remaining employees wondering if their own dismissal or departure will be met with the same treatment. 

A common misconception is that garden leave only benefits employers by preventing poaching and knowledge leaks. But well-structured policies can protect both sides. Employees continue receiving pay and benefits, giving them financial stability as they prepare for their next professional leap. Employers, meanwhile, maintain control over sensitive information and manage a smooth transition. When companies communicate it transparently and apply it fairly, garden leave often comes across as a benefit—not a punishment.

Ensure compliance and mitigate risks with Oyster

Garden leave may seem like a good strategy, but enforcing it depends on local employment laws, which vary widely. Without proper employment contracts and fair offboarding practices, organizations risk damage to company culture, employer reputation, and their bottom line. 

That’s where having the right global employment support matters. Whether drafting contracts with garden leave policies that align with regional regulations or simply handling everyday time-off requests, Oyster ensures compliance in 180+ countries. 

Book a demo to learn more.