Garden leave sounds great, doesn’t it? Sitting around at home doing nothing, and still being paid for it.
Well, there are certainly benefits for employees in many situations. It will offer them some mental space before they start their next role, and the financial security cannot be underestimated. On the other hand, their workplace relationships will be rudely cut off. That can be somewhat traumatic – for employees and their colleagues.
For employers, putting someone on garden leave may mean preventing a valuable asset from immediately joining the competition. It also smooths over any relationship problems that may stem from having a disaffected employee around the office. Losing someone senior is disruptive – garden leave is often deployed to minimise collateral damage. In this blog, we look at garden leave from various angles:
- What is garden leave?
- Why do employers need garden leave?
- When should garden leave be instigated?
- Pros and cons of garden leave
- What can you do when you’re on garden leave?
Let’s start with the basics. What does garden leave mean for both employees and employers?
What is garden leave?
If an employee has been made redundant or resigned, garden leave is a set period of time before they can start their next role. They remain on the payroll as an employee but are formally in the process of terminating their employment until their garden leave ends.
Therefore, there are significant restrictions on their activity during this period. They will, however, have plenty of time to potter around in their garden.
During garden leave, employees are usually prohibited from working for other companies or themselves. All business contacts should cease (even farewell messages could breach the agreement). Employees would be cut off from all corporate communication and prohibited from entering offices. Some garden leave clauses even prohibit social contacts with ex-colleagues, although this is typically hard to police.
If an employee breaks their garden leave this may result in disciplinary action, loss of redundancy pay, or other benefits. Garden leave is prevalent in the UK, Australia, and New Zealand.
Why do employers need garden leave?
Garden leave is a protectionist measure to stop an employee from disrupting their former colleagues or taking information to a competitor. Unlike a non-compete clause, garden leave is time limited – it doesn’t stop you from joining a competitor when it ends.
Employees may also prefer to be at home rather than serve their notice alongside colleagues who know that they are going. This may cause various unpleasant situations for an employer – it is certainly an initiative that benefits workplace harmony. Out of sight, out of mind.
On one hand, no one wants to work with someone who is moving onto bigger and better things. On the other hand, working with a colleague who has been made redundant will also not be easy. Garden leave enables people to get on with their jobs without the emotional upheaval that always accompanies employee turnover.
As salaries and benefits continue until the end of garden leave, it is an attractive proposition for most employees and will ensure an orderly transition in most cases.
When should garden leave be instigated?
Most senior employees will have a garden leave clause in their contracts. This will not always be instigated. In certain circumstances, employers may waive the requirement. Where there is little risk to the business and an employee wishes to start their next role sooner, there is sometimes an element of negotiation. Employers often have the final word, although employees are increasingly challenging such decisions at employment tribunal.
There are certain circumstances when garden leave is essential.
If there is a risk of detrimental action from the employee, a strict period of garden leave is essential to guard against behaviour that may negatively impact the working environment. People do strange things when rejection hits. Employers thereby protect the workplace culture and ensure that there are not continual interpersonal hand grenades going off every time someone leaves. Garden leave ensures that leavers are on their best behaviour.
The second common reason for garden leave is when an employee has access to confidential information that may benefit a competitor when they leave. This could form grounds for a non-compete clause when they are banned from joining a competitor for a certain period, but garden leave often supersedes this as a catch-all approach. When an employee is eventually contractually free, they would have been out of the loop long enough to pose less of a threat from a competitive point of view.
At the end of the day, garden leave for six months (for example) means that a competitor is not going to be able to employ a valuable asset, so that has to offer a certain benefit.
Whatever the situation, the legal implications of garden leave should be considered carefully by both employee and employer. Any oversights may prove costly.
Pros and cons of garden leave
Garden leave has pros and cons for both employers and employees. Employers have a choice on how they will deal with an employee at the moment of departure and employees have a choice when it comes to drawing up their employment contracts.
Garden leave pros for employers
One interesting aspect of garden leave for employers is that employees are still available to smooth the transition to a successor and answer all associated queries. Employers will dictate just how much contact there should be so that there is a suitable transfer of responsibilities.
As previously mentioned, there is a definite competitive advantage when you prevent a valuable asset from joining a competitor immediately. They won’t be able to leverage information and a stricter non-compete clause may prevent them from joining certain competitors altogether.
Garden leave cons for employers
Garden leave can be expensive for employers, who will not get anywhere near the productivity from the employee in question. When putting an executive on garden leave on their normal package, it is not only their work that they miss but the leadership of their team. Productivity takes a nosedive for a while.
There are sometimes complicated legal ramifications in certain circumstances. Employers need to retain an excellent employment law firm and upper management need to consult before they rush into emotionally charged decisions.
The final garden leave con for an employer is reputational. There is no worse “look” than marching out a popular executive with their box of personal items, especially if they do not have a chance to say goodbye to anyone. This sadly remains the normal procedure, but it is certainly damaging for employee perceptions.
Garden leave pros for employees
Employees often welcome garden leave, even if they don’t have particularly green fingers. It gives them a chance to take a breather from the work treadmill and assess their next move. While they might not always be able to commence formal recruitment proceedings, it is a chance to start networking and get their CV and cover letters written. Some types of garden leave do allow a job search to begin, so this would be an ideal use of their time.
Not doing much work for ongoing compensation is obviously a benefit, but this should be tempered by the knowledge that they will not have any further income when the garden leave ends. It may seem a little frustrating that they need to wait, but sometimes an enforced period of inactivity can clear their head.
Garden leave cons for employees
There is a certain frustration during garden leave when you are restricted from moving on. Most people are itching to take the next step and when garden leave lasts up to 90 days (with senior executives), the motivation to hit the next job running can wane. It is all too easy to get used to sitting on the couch and watching Netflix.
Some potential employees may view garden leave as indicating a lack of trust between the employer and the leaver, although most would understand that it is a normal part of the employment process. The most important thing is to not breach your garden leave restrictions. That is the sort of thing that will go on your employment record.
What can you do when on garden leave?
While on garden leave, the employee may be required to be available by an employer for various reasons, so taking a holiday may not be possible unless previously agreed. An employer may also compel an employee to take any available paid holiday time as part of the garden leave rather than in addition to it.
You will not have access to laptops or company devices during this time, but you must be contactable at all times. Having said this, initiating contact with ex-colleagues, suppliers, or partners yourself will often invalidate your arrangement. Garden leave is a strict agreement for a reason — it is not business as usual.
In terms of the financials, employees are entitled to their salary and selected other benefits, although bonus schemes will nearly always be exempt.
If employers and employees go about garden leave in the right way, there are benefits for all. People will leave with the minimum of disruption and with their relationships largely intact. Treating people right on the way out is almost as important as treating them right on the way in. Great employers use garden leave as an emotional and financial release value for their top people. They might not like it, but the benefits outweigh the drawbacks.
- Garden leave is common for mid and senior pros in a corporate setting.
- It is often detailed in a contract and rarely imposed post dismissal.
- Garden leave rules are often linked to ongoing compensation payments.
- Don’t break them – there could be legal implications.