Garden Leave and Pay in Lieu of Notice (PILON) - What You Need to Know

When an employee leaves your company, either due to redundancy or dismissal, there is plenty of scope for confusion, confrontation and miscalculation.

Understanding the ins and outs of PILONs and garden leave is the first step to ensuring you and your employees don’t suffer during the notice period.

What is garden leave?

Garden leave in the UK is where you tell an employee not to come into the office during their notice period. But they remain an employee, so are still entitled to the regular pay and benefits they’d normally receive and are still bound by their regular employee obligations.

The employee can’t perform any work activities while on garden leave unless you call them back into the office.

This means, because the employee has to keep themselves available for any work that comes in, they cannot go to work for their new employer during this period.

Also, contractual clauses, such as the non-competition clause, binds the employee to the employer until their notice period is complete.

Many employees (and employers) ask the question ‘Is garden leave a bad thing?’ The short answer is no.

You don’t lose any rights or entitlements while on leave, it is mostly a tool for the employer to better manage the company information during the transitional period between an employee leaving, and a new employee starting.

Gardening leave helps protect your data by restricting employee access to computers, files and systems. 

How does garden leave work?

The right to place an employee on garden leave is a contractual one, meaning you should include a garden leave clause when drafting an employee contract.

In the clause, you can include details such as who they can communicate with regarding leave, what they should expect regarding attendance at the office, and so on.

This clause is particularly important, as placing an employee on leave without it constitutes a breach of contract. And the employee could claim constructive dismissal.

Gardening leave and employee rights

An employee has all the same rights they would have if they were working their notice.

If the employee’s notice period is longer than six months, and they are on garden leave for this period of time, a court may rule that it is longer than necessary to protect their interests.

When an employee hands in their notice, and you wish to place them on gardening leave, you will need to clearly set this out in a garden leave letter.

Alternatively, you can include a statement relating to garden leave in a letter responding to an employee’s resignation.

All you need to include is a statement declaring when the period begins and when it finishes.

Garden leave and redundancy

You can put an employee you’re making redundant on garden leave. You can do this from the time their notice period starts up until they leave the business.

But the same rules apply—the employee may not begin new employment until the garden leave period is over.

Garden leave and holiday pay

You can request an employee takes their remaining holiday entitlement during garden leave, so long as they give sufficient notice to book this, and the holiday entitlement doesn’t exceed the notice period.

Also, take into account any holiday accrued by the employee during their notice period, as they will continue to accrue holiday during this time.

What is PILON?

(PILON) Payment in lieu of notice is a term that refers to a payment made to an employee instead of a notice period. There are significant differences between a PILON and Garden Leave.

What is the difference between PILON and garden leave?

The first, and most prominent, difference is with an employee on garden leave, not only do you have to continue to pay them as normal, they remain an employee. This means they are unable to work for another company until the period has ended.

An employee who receives a PILON payment does not have a notice period and is free to go straight into other employment.

An employee on garden leave is technically still employed. So, they can claim the same rights and pay, even though they may not be present.

For further insight into PILONs, there are some resources available via Acas or by getting in touch with Croner.

Expert Support

If you require further information on this subject, contact a Croner expert on 01455 858 132.