What it means
The term comes from the idea that the employee has nothing to do but tend the garden while the notice period runs down. It is most common in sales, finance and senior management, where a departing person can carry live commercial information straight to a rival.
Legally, the employment relationship continues throughout, so the employee still owes duties of loyalty and confidentiality and cannot start a new job elsewhere while the notice period runs. The employer keeps paying salary, pension contributions and benefits for the full period.
Employers use it because it is more likely to hold up than a post-termination restriction. A court asked to enforce a twelve-month non-compete after employment has ended will scrutinise it heavily, whereas keeping a paid employee at home during their contractual notice is far harder to challenge.
The cost is real and should be budgeted for, because the business pays a full salary for output it does not receive and often pays a replacement at the same time. That is why long notice periods are usually reserved for roles where the commercial risk justifies the double cost.
There is a human dimension that boards underestimate. Extended time away from the market erodes an individual's contacts and confidence, and the practice can sour a relationship with someone who might otherwise have been a useful advocate, so many employers now negotiate a shortened period rather than enforcing the full term.
In practice
Real-world examples
Example 1
A trading desk head resigns to join a rival and is walked off the floor the same morning. He is paid for his three-month notice period at home, with system access revoked, so he cannot take live positions or client information with him.
Example 2
A marketing director serving six months of gardening leave is asked to remain available for handover questions by phone. Because she is still employed, the contract requires her cooperation and she is paid throughout.
Example 3
A regional manager negotiates a reduction from four months to six weeks so she can start her new role sooner. The employer agrees in exchange for a full customer handover and written confirmation that she will not approach named accounts.
Think of it
Imagine a head chef leaving a famous restaurant to open a rival diner across the street. Instead of letting them stay in the kitchen for their final month to memorise the secret recipes, the owner pays them to stay home, keeping the recipes safe.
Formula
Calculation
Cost of gardening leave = (Annual salary / 12) x Months of notice, plus employer benefit and pension costs over the same period.
A sales director on an annual salary of $180,000 resigns and is placed on gardening leave for a six-month notice period. Employer pension and benefit costs run at 12% of salary.
Monthly salary = $180,000 / 12 = $15,000.
Salary cost over the notice period = 6 x $15,000 = $90,000.
Employer pension and benefits = $90,000 x 0.12 = $10,800.
Total cost of the gardening leave = $90,000 + $10,800 = $100,800. If the employer also recruits a replacement who starts three months in, it carries three months of overlapping salary at $15,000 a month, adding $45,000 and taking the total transition cost to $145,800.Case study
Seen in the real world
Fenwick Marine Insurance is a fictional, illustrative broker whose top producer resigned to join a direct competitor, managing a book worth $4,200,000 in annual premium income. Her contract carried a six-month notice period, and the board placed her on gardening leave immediately.
The six months cost Fenwick around $126,000 in salary and benefits for no output. During that window, two account executives were introduced to every major client, renewal terms were agreed early, and roughly 80% of the book renewed with Fenwick before the producer was free to approach anyone.
The illustrative conclusion the board drew was that the leave was worth the money in this instance because the retained premium far exceeded the cost, but only because they used the time actively. Gardening leave buys a period of protection, and it is wasted if nobody uses the period to rebuild the relationships.
Watch out
Common mistakes
- Assuming gardening leave can be imposed without a contractual right. Many contracts need an express clause, and sending someone home without one can amount to a breach.
- Treating it as a substitute for a proper handover. The protection only pays for itself if colleagues are actively introduced to clients while the departing employee is away.
- Forgetting that the employee is still employed. Bonuses, share vesting and holiday entitlement usually continue to accrue during the period unless the contract says otherwise.
Questions
People also ask
Is an employee paid during gardening leave?
Yes, they receive full salary and contractual benefits because the employment relationship has not ended.
Can someone on gardening leave start a new job?
No, they remain employed and bound by their existing contract until the notice period expires.
How does gardening leave differ from a non-compete clause?
Gardening leave operates during the notice period while the person is still employed and paid, whereas a non-compete restricts them after employment has ended and is generally harder to enforce.