What is Gardening Leave ? A Simple Guide for Employer

In simple terms, garden leave is when an employee is asked to stay away from work while still receiving their full salary and benefits. Here are its key principles:

• Paid time off: During garden leave, employees are compensated for their time away from work.

• Restrictive covenants: Employers may impose certain restrictions, such as non-compete or non-disclosure clauses, to protect their interests.

• Limited duties: Employees may be prohibited from engaging in work activities that could harm the company or provide a competitive advantage to a future employer.

It’s important to note that garden leave differs from other employment-related terms like notice period or non-compete clauses. While a notice period involves the employee actively working until their departure date, garden leave provides paid leave away from work, ensuring a smooth transition for both parties as outlined in the employee contract.

Garden leave is typically granted to employees who hold positions of significance within an organization. It is more commonly offered to senior employees, executives, key employees, or those with access to sensitive information, trade secrets, or client relationships.

The employer typically decides to place an employee on garden leave, often as part of an employment contract or during a period of notice when an employee is leaving the company. This period is crucial in managing the employee's departure and its implications for the company.

The criteria for determining who is placed on garden leave may vary depending on the company’s policies, industry practices, and the nature of the employee’s role.

The most common reason is to prevent employees from taking sensitive information when they leave their current employer. Companies also offer garden leave for the following reasons:

• Protecting company interests: Garden leave allows employers to safeguard their confidential information, trade secrets, and client relationships from potential harm before the employee leaves. It also ensures the proper management and retrieval of company property, such as laptops and smartphones.

• Preventing competition: By enforcing garden leave, companies can prevent employees from joining a competitor immediately, minimizing the risk of sharing sensitive information.

• Transition period: It provides a buffer zone for employers to find suitable replacements, train new hires, and ensure a smooth handover of responsibilities.

• Maintaining morale: Granting garden leave can be seen as a gesture of respect and fairness, fostering positive employee relations even during a separation.

By offering garden leave, companies can balance protecting their interests and providing employees with a secure and respectful transition out of the organization.

When it comes to garden leave, employees have certain rights and obligations to be aware of. Here’s a quick rundown: Employees on garden leave are entitled to their full salary and contractual benefits per their employment contract. They should also have access to full pay and accrued vacation time or allowances.

Accrual Leave: Definition, Examples, and How It Works

During garden leave, employees are typically required to adhere to the terms and conditions of their employment contract, including any restrictive covenants.

This may involve refraining from engaging in work activities that could harm the company or violate confidentiality agreements. They may assist or consult with company officers and senior management, but their engagement with broader company operations is restricted.

Garden leave can impact an employee’s employment status, benefits, and responsibilities. Here are the key points to consider:

• Employment Status: While on garden leave, the employee remains officially employed by the company, albeit not actively working. This status can affect their eligibility for certain benefits and legal protections.

• Benefits: As outlined in their employment contract, employees on garden leave generally receive their regular salary and benefits, including healthcare coverage and pension contributions.

• Responsibilities: During garden leave, employees are often relieved of their day-to-day work duties but may still be subject to obligations such as non-compete clauses, non-solicitation agreements, or restrictions on contacting clients or colleagues.

Employees need to understand these impacts and review employee’s contract to ensure they know their rights and entitlements while on garden leave. Additionally, the concept of employees garden leave is not a punishment but a contractual obligation that can have various commercial and legal benefits for employers.

Tax implications of garden leave

The tax implications of garden leave vary depending on the jurisdiction and the specific circumstances of the employee’s departure. In general, garden leave is considered a form of paid leave, and the employee’s salary and benefits continue to be taxed as usual.

In the UK, for example, employees on garden leave are entitled to the same pay and benefits as during their employment, and their salary is subject to income tax and national insurance contributions. Employers may also be required to pay employer’s national insurance contributions on the employee’s salary during the garden leave period.

In the US, the tax implications of garden leave are less clear, as the practice is less common. However, it is generally considered that garden leave is a form of paid leave, and the employee’s salary and benefits would be subject to income tax and other applicable taxes.

To mitigate any negative impact on company culture, employers can take the following steps:

• Communicate clearly with remaining employees about the reasons for the gardening leave and the expected duration.

• Ensure that the departing employee’s responsibilities are transferred to other employees or a replacement is hired to minimize disruption.

• Provide support and training to remaining employees to help them adapt to the change.

• Consider offering counseling or outplacement services to the departing employee to help them transition to a new role.

• Review and update the company’s employment contracts and policies to ensure that they are clear and fair.

By taking these steps, employers can minimize the negative impact of gardening leave on company culture and ensure a smooth transition for all employees involved.

While on garden leave, employees may face restrictions on networking, job searching, or contacting clients and colleagues.

However, they can utilize online platforms, attend industry events, or seek professional development opportunities to expand their network discreetly.

Additionally, taking advantage of the time to enhance their skills or pursue certifications can boost their marketability. Starting a new job during garden leave is generally prohibited by contractual obligations, although employees may search for one.