Key Takeaways
- Garden leave means you stay employed and on full pay during your notice period but usually cannot start another job or contact clients.
- You are entitled to your normal salary, benefits, and holiday accrual throughout garden leave in the UK, including rights to a tax-free element of redundancy pay if eligible.
- Employers can only place you on garden leave if your employment contract includes a valid garden leave clause, otherwise this may be challenged.
- Our solicitors can review your contract and garden leave settlement agreement to ensure your rights are protected and negotiate improved ex gratia payments, references, or release from restrictive covenants.
- Agreeing to garden leave without advice risks losing leverage in redundancy or mutual exit negotiations, as well as potential claims under s.203 Employment Rights Act 1996.
- Our legal advice is fully remote, SRA regulated, and free to employees as your employer usually pays all our fees.
- You should not seek other work, consult clients, or act for competitors while on garden leave, as doing so may breach contract and lead to employment disputes.
- Settlement Agreement Lawyers are rated Excellent with over 1,400 five-star reviews of our lawyers on Trustpilot, Google, and other platforms, and offer same-day appointments UK-wide.
Garden leave: employee rights, pay, and settlement agreement strategy
If your employer has placed you on garden leave or you are negotiating a settlement agreement that includes garden leave in the UK, it is vital to understand your employment rights before you sign. Garden leave means you remain employed, on full pay and benefits, but away from work during your notice period—while strict contractual rules usually prevent you from starting another job or contacting clients. Independent legal advice is a legal requirement for any settlement agreement to be binding, and your employer almost always covers the full cost.
Taking legal advice matters because once you sign, you give up your right to bring employment claims and may miss out on fair redundancy pay, tax savings, or a stronger negotiation position. Our solicitors ensure your settlement agreement, garden leave clause, and final pay are reviewed properly at no charge to you, so you do not risk being locked out of future work or losing valuable entitlements.
This article explains how garden leave works in practice, what a valid garden leave clause must include, how pay and benefits are protected, and how our solicitors can help negotiate more favourable settlement terms when garden leave is proposed. For clear answers and to protect your rights, call us on 0800 054 1144 or book your settlement agreement advice online.
What is garden leave and how does it work in the UK?
Garden leave is a period during which you remain employed and on full pay but are required by your employer not to attend work, not to undertake usual duties, and often not to contact colleagues, clients, or suppliers. This period usually arises after you have given notice or a settlement agreement has been reached, and before your employment formally terminates. In the UK, garden leave must be expressly permitted by your employment contract – it is not an automatic entitlement for employers.
Employers use garden leave to protect their business interests, especially where you have access to confidential information or key client relationships. Placing you on garden leave keeps you out of the workplace, but your employment contract remains active. You must remain available to your employer (though active work is rarely required), and you must continue to comply with all contractual duties, such as confidentiality and non-compete clauses.
The main purposes of garden leave are to prevent you from starting work for a competitor, protect sensitive information, and manage the transfer of responsibilities. The maximum length is typically governed by your notice period. Unless the contract says otherwise, you cannot insist on being put on garden leave – nor can the employer require it without your prior, contractual agreement.
A client with a 3-month notice period was placed on garden leave as soon as she signed a mutual settlement agreement, meaning she could not work elsewhere or contact clients for the duration. She remained on full pay and preserved all her employment rights until formal termination at the end of the notice period.
For further detail, read the ACAS guidance on garden leave and notice periods or review your own contract carefully.
Why is independent legal advice (ILA) required for garden leave settlement agreements?
When a settlement agreement includes garden leave, independent legal advice (ILA) is a strict legal requirement before you can sign. Under section 203 of the Employment Rights Act 1996, you cannot lawfully waive your legal rights – including claims for unfair dismissal, redundancy, or discrimination – unless you have taken advice from a qualified, independent solicitor who is both insured and not acting for your employer.
The law protects you against pressure to sign away valuable rights – especially during redundancy, performance procedures, or when you are being excluded from work on garden leave. Your employer must pay the cost of this legal advice directly, so getting professional guidance is free for you as the employee. The solicitor’s ILA certificate then makes the agreement legally binding; without it, your waivers will not be enforceable.
ILA is essential where complex issues arise, such as how your notice period is handled, the length and fairness of garden leave, and whether you need to negotiate anything (like the right to work elsewhere or the inclusion of a positive reference). It also covers tax risks, confidentiality, and the impact of covenants. Only a regulated, impartial solicitor can assess if the terms are fair and in your best interest.
Never feel pressured to sign a settlement agreement, even when told legal advice is “just a formality.” Clarify every term—garden leave, pay, references, post-termination restrictions—with our solicitors before you commit. Your employer cannot force you to use a solicitor of their choice, and the service is fully funded by your employer and free to you.
For more information on why legal advice is mandatory, see the Settlement Agreement Advice page, or review the legislation.gov.uk guidance on settlement agreements.
If you are considering signing a settlement agreement that includes garden leave, you must obtain independent legal advice for it to be legally valid. Call our settlement agreement solicitors on 0800 054 1144 or book your settlement agreement advice online. The employer covers our fees, so expert advice is always free for employees.
What are your rights to pay, benefits, and holiday on garden leave?
During any period of garden leave, you remain an employee with full rights to your standard pay and all contractual employment benefits. This includes basic salary, car allowance, pension contributions, private health cover, and any other agreed perks. Your employer cannot reduce your pay, stop benefits, or avoid pension payments unless the contract specifically permits it, which is very rare.
Holiday continues to accrue as normal while you are on garden leave unless your contract states otherwise. You remain eligible for all statutory and contractual holiday entitlement. Your employer can require you to take outstanding holiday during garden leave if they give proper notice (usually double the length of the intended leave), but unused holiday is typically paid in lieu at termination if it cannot reasonably be taken during garden leave.
You must also receive any bonuses, commission, or other performance-related pay if the scheme rules permit payment during notice. Check scheme rules and seek our advice if the employer is seeking to exclude you. Benefits in kind, such as cars or laptops, usually remain, but your employer can request their return if you are not working.
Carefully review your last payslip and contractual benefits before agreeing to garden leave. Ensure holiday pay calculations match your full entitlement, and challenge any attempt by your employer to exclude bonuses or commission unless your contract or scheme rules allow it. Our solicitors can check your calculation for free.
For worked examples or to estimate what you should receive, use our Settlement Agreement Calculator or see the gov.uk guidance on holiday entitlement.
Does garden leave affect redundancy pay and continuous service?
Being placed on garden leave does not break your continuous service. Your employment is considered continuous for all statutory purposes until your contract formally ends, which means your redundancy rights, statutory redundancy pay, and possible right to claim unfair dismissal all remain protected throughout the garden leave period.
Statutory redundancy pay is calculated based on your length of continuous service (typically at least two years’ continuous employment) and your age and weekly pay. Garden leave does not reduce this entitlement – your final termination date is what counts. Likewise, you continue to accrue service for incrementing notice pay, pension rights, and holiday entitlement during garden leave.
If you are subject to redundancy consultation while on garden leave, you still have the right to be consulted and take part in the process, including the possibility of seeking alternative employment within the organisation. If a new redundancy or notice period arises during garden leave, the later termination date would usually extend your continuous service.
A client was placed on three months’ garden leave after his redundancy notice. His employment officially ended at the close of the garden leave, and his final redundancy pay was calculated based on his service right up to that end date—not the start of garden leave.
For more on your redundancy rights and entitlements, visit Redundancy and use the Redundancy Calculator, or see the gov.uk statutory redundancy pay guidance.
Is the financial package in your garden leave settlement agreement fair?
Assessing the fairness of your garden leave settlement agreement requires careful review of all pay components and benefits – both statutory and contractual. Key sums to check include basic salary for the garden leave period, full payment for outstanding notice, accrued untaken holiday, bonus or commission eligibility, and your redundancy or ex gratia payment.
Where a settlement agreement is proposed, most employers cap payments at contractual minimums. However, you are within your rights to negotiate for more if the dismissal might be unfair, if discrimination is involved, or if your employment rights have not been properly observed. It’s essential to break down each element and check whether the calculation aligns with what you are due, and if sums like an “ex gratia” settlement payment are being offered in addition to (not instead of) what you are already owed.
Checking fairness also means reviewing restrictive covenants and the effect on your ability to work elsewhere, and whether you are being offered an agreed reference. A plainly-written financial schedule, including a clear presentation of each payment sum, is best practice. If these details are missing or unclear, request clarification or amendments before signing.
| Payment Type | Tax-Free? | Influences Fairness? |
|---|---|---|
| Garden leave pay | No, usually taxable | Yes, must be full salary |
| Statutory redundancy pay | Up to £30,000 | Yes |
| PILON payments | No, usually taxable | Yes, must be correct |
| Holiday pay | No, usually taxable | Yes |
| Ex gratia settlement | Up to £30,000 | Yes, case-dependent |
Before signing, use our Settlement Agreement Calculator to estimate your package. If your agreement includes deductions, unusual sums, or unclear wording, review it with our solicitors first – the employer pays our fees, so legal checks cost you nothing.
If you’re uncertain whether your proposed garden leave or settlement agreement terms are fair or complete, speak to our experienced solicitors for peace of mind. Call 0800 054 1144 or book your settlement agreement advice online for a free, employer-funded review and expert advice from SRA-regulated settlement agreement solicitors.
How is tax applied to garden leave pay and redundancy in settlement agreements?
Tax treatment is one of the most misunderstood areas of garden leave and settlement agreements. Generally, pay and benefits received during garden leave – including basic salary, holiday pay, and benefits-in-kind – are taxed as normal earnings through PAYE, with deductions for income tax and National Insurance.
Statutory redundancy pay and approved ex gratia termination payments can be paid tax-free up to £30,000, but only if they are not contractual payments (such as salary or notice pay). If you receive a payment in lieu of notice (PILON), either expressly under your contract or triggered by the agreement, that sum is fully taxable under the Post-Employment Notice Pay (PENP) rules introduced by HMRC. Any untaken holiday at termination, paid in lieu, is taxed as normal earnings.
For settlement agreements, employers may attempt to structure payments to maximise the tax-free element, but HMRC can challenge arrangements that artificially disguise taxable salary as compensation. Tax indemnity clauses often require you to repay the employer if HMRC later rules more tax was due. Always request a clear written breakdown and get our tax-expert solicitors to check your agreement.
A client’s settlement offered £10,000 as an ex gratia sum and three months’ garden leave pay. Only the £10,000 was tax-free; the garden leave pay was fully taxable under PAYE. The settlement contained a standard tax indemnity clause, which our solicitors reviewed and amended before signing.
For more on termination payment tax rules, consult the gov.uk taxation of termination payments guide or request specific advice through your settlement agreement review.
Key clauses and risks in garden leave settlement agreements: what should you watch for?
Settlement agreements covering garden leave contain a mixture of standard and bespoke clauses. Some are straightforward—such as pay and notice terms—while others can create serious long-term restrictions or unexpected obligations. You must understand every clause before signing, as your ability to start a new job, protect future earnings, or maintain your reputation can be at stake.
Risks often arise in the form of restrictive covenants, non-disparagement obligations, and requirements to return property or information. Clauses may seek to silence you about the reasons for your departure or restrict you from competing or contacting certain clients for months after your termination, in addition to the garden leave itself. Some agreements contain repayment or claw-back terms if you break a condition, or tax indemnities if HMRC later assesses more tax.
Special attention is needed for the length of any combined garden leave and post-termination restriction periods: courts are unlikely to uphold lengthy exclusions, but only if they are challenged promptly. Clarify every restriction in writing, and seek amendments if they are broader or longer than strictly necessary to protect your employer’s legitimate business interests.
Never assume all settlement agreements follow a standard template. We have seen wide differences, including attempts to extend competing restrictions beyond the garden leave. Insist on precise, limited terms and request amendments as needed—employers will often compromise during negotiation if asked.
For more on problematic clauses and how we negotiate on your behalf, read our Client success stories or see our Settlement Agreement Advice page.
Restrictive covenants: can you work elsewhere during garden leave?
Most garden leave clauses make clear that you cannot start a new job or provide services to another business throughout the garden leave period, unless your employer gives written consent. These restrictions exist to protect confidential information and business relationships, and they are generally enforceable if the contract allows for them. Typically, the restriction only lasts as long as your paid notice period and employment contract.
Post-termination restrictive covenants, such as non-compete clauses, may add further restrictions after the garden leave ends. These are only enforceable if reasonable in scope and duration. The combination of garden leave and post-termination restrictions should not amount to an excessive restraint on your ability to work, but challenges must usually be made before signing the agreement.
A client was put on two months’ garden leave and had a three-month post-termination non-compete clause. Our solicitors negotiated a reduction in the non-compete period so that the total restriction did not exceed the initial notice period, enabling him to start new employment sooner.
For more detail on post-termination restrictions and your options, see Constructive Dismissal and the ACAS guide to restrictive covenants.
Confidentiality and non-disparagement obligations
A standard feature of settlement agreements and garden leave is stringent confidentiality. You must keep all sensitive commercial information secret, not share internal details and, often, avoid making negative comments about your employer or colleagues (“non-disparagement”). Sometimes, confidentiality covers even the existence or terms of the agreement itself.
While these clauses are enforceable, they must be reasonable and allow you to disclose details to legal advisers, certain regulatory bodies, or close family. Overly broad clauses which would make it impossible for you to explain your departure (for example, during future job applications) are commonly negotiated down.
Ask our solicitors to check confidentiality and non-disparagement terms carefully. Overly broad clauses can prevent you from explaining your employment history to recruiters or discussing your experience with reference providers. We commonly negotiate carve-outs for accurate references and truthful statements.
For further information, see our detailed Discrimination and Harassment service pages for advice on settlement confidentiality.
References and agreed announcements
Settlement agreements can include a clause about the provision of employment references and any announcement made to internal teams or external contacts. Agreed references are usually limited to confirmation of dates of employment and job title (“factual reference”) but it is possible to request a more detailed or personalised version if negotiated.
Agreed announcements (or “circulars”) dictate what your employer will say about your departure to other staff, clients, or the public. If handled poorly, the absence of a neutral reference or announcement can make future job seeking harder, so ensure these terms are clear and agreed up front before signing.
After requesting a reference clause in her settlement agreement, a client secured an agreed, neutral reference alongside a positive agreed announcement for customers, helping her transition smoothly to her next role with minimal negative impact.
For more on negotiating references, visit our Client success stories or see ACAS advice on references included in settlement agreements.
Tax indemnities and repayment clauses
Settlement agreements almost always contain a tax indemnity: you promise to reimburse your employer if HMRC later decides that additional tax or National Insurance was due on your settlement payments. Repayment clauses may also require you to return settlement sums if you breach important terms, such as confidentiality or restrictive covenants.
While these are standard, it’s vital to review their wording and ensure they do not go beyond what is legally required. Ask for clarity on the sums involved, the notification procedures, and any limitation periods for claims against you. Excessively broad or punitive clauses should always be renegotiated.
If the settlement agreement contains a tax indemnity, ask our solicitors to check it does not make you liable for amounts outside your control. For repayment clauses, ensure obligations are not triggered by trivial or accidental breaches. Protect yourself by seeking precise, fair wording.
For deeper analysis and example clauses, see the Tax and Liability Clauses section in our Settlement Agreement Advice resource.
Garden leave clause essentials: is your employer allowed to put you on garden leave?
Whether your employer can put you on garden leave depends entirely on the terms of your contract of employment. In the UK, there is no automatic right for employers to exclude you unless there is a specific “garden leave” or “work during notice” clause in your signed contract or the right is expressly included as part of a negotiated settlement agreement.
Courts are reluctant to imply such rights for the employer. Attempting to enforce garden leave without an express contractual clause is likely to be seen as a breach of contract. If your contract does contain a garden leave clause, it must set out the length (typically notice period length), pay and benefits retention, and any restrictions to which you are subject, such as working elsewhere.
If a settlement agreement is used to put you on garden leave, that agreement acts as a contractual variation—so its wording becomes vital. You should never resign or accept garden leave until you are clear on the practical and financial implications.
A client approached us after being told she must “work out her notice from home.” Her contract had no garden leave clause. Our solicitors negotiated with her employer for either full duties at work or a mutually agreed settlement package in return for her garden leave, improving her outcome significantly.
To check if your contract allows for garden leave, review the exact wording or seek a Book your settlement agreement advice online consultation.
Step-by-step guide: how to sign your garden leave settlement agreement remotely
Signing your garden leave settlement agreement remotely is straightforward, but important to follow the process precisely so your legal rights are protected and the employer funds your legal advice. Here’s how it works:
- Send your draft settlement agreement and employment contract to our solicitors via secure upload.
- Our solicitor reviews the draft for fairness—checking pay, holiday, redundancy rights, restrictive covenants, and tax implications.
- You have a same-day phone or video appointment. We explain every term, answer questions, and suggest negotiation points if any term is unfair or unclear.
- If you are happy, you and our solicitor both sign the ILA certificate remotely. The agreement is then legally binding.
- We send the signed documents back to your employer. Your settlement and garden leave commence under the agreed terms.
Never submit a signed settlement agreement to your employer before you’ve had your solicitor appointment, even if your employer pressures you. Signing first may invalidate your settlement or make it harder to renegotiate terms—even though advice is mandatory and paid by your employer.
For detailed practical information on the process and to arrange a priority review, visit our Book your settlement agreement advice online page.
If you are ready to finalise your settlement, call our solicitors on 0800 054 1144 or book your settlement agreement advice online. All advice is same-day, remote, and free to you as the employer covers our fees.
Why Choose Settlement Agreement Lawyers?
Settlement Agreement Lawyers specialise exclusively in UK settlement agreements and garden leave scenarios. Our SRA-regulated solicitors deal with complex redundancy, garden leave, and exit negotiations daily, securing fair terms for employees while removing the stress of the entire legal process. Every service is fully remote, efficient, and tailored to your needs—our solicitors check every clause, from pay to covenants, giving you clear, practical advice.
Because your employer covers our capped fees, independent legal advice is always free for you. We offer immediate appointments and straightforward communication designed around employees’ rights, not company interests. If negotiation is needed, our solicitors do so rapidly and discretely—protecting future references and your ability to work elsewhere. Our client feedback and outcomes speak for themselves; see our Client success stories for real examples.
A client presented with an unclear garden leave clause received an urgent review within hours. Our solicitors secured a higher settlement and a positive reference, avoiding months of uncertainty and unlocking a smooth transition to his next job.
For situations involving redundancy, discrimination, or performance management, our experience and expert knowledge of employment law ensure you receive the best possible financial and legal protection. Explore more Settlement Agreement Advice or contact us directly today.
Frequently Asked Questions About Garden Leave
Can my employer put me on garden leave without a clause in my contract?
No, your employer cannot lawfully place you on garden leave unless your contract or a valid settlement agreement expressly allows it. Otherwise, you have the right to attend work and perform your duties until your employment ends.
What happens to my pay and benefits during garden leave?
You continue to receive your normal pay and contractual benefits throughout garden leave. This includes salary, pension, bonuses (where due), and holiday accrual, provided you remain an employee until the formal end of your contract.
Can I get another job while on garden leave?
Usually not, unless your employer gives written permission. As you remain employed and under contractual duty, you must not undertake other work—especially for competitors—unless your agreement specifically allows it.
How does garden leave compare to PILON in settlement agreements?
Garden leave involves serving out your notice period while staying away from work on full pay, whereas a payment in lieu of notice (PILON) ends your employment immediately and pays your notice as a lump sum. Both have different tax and benefits implications.
Does garden leave count as continuous employment for redundancy and notice?
Yes, your continuous employment runs until the formal termination date at the end of your notice or garden leave. This preserves your redundancy rights and affects calculations for statutory and contractual pay.
What should I do if I’m placed on garden leave during redundancy consultation?
Participate in the consultation as usual—you remain an employee with all rights to information, representation, and fair process. You should still be involved in any selection pools or redeployment opportunities.
How can I negotiate better terms for garden leave in a settlement agreement?
You can ask for clarity on pay, benefits, and holiday, request a shorter garden leave or earlier release, and negotiate restrictions or references. Our solicitors will support your negotiation and can often secure improvements or concessions.
What happens if I breach my garden leave restrictions?
Breaching garden leave—such as by starting a new job or leaking confidential information—could forfeit your settlement and leave you liable for damages or repayment. Seek legal advice before taking any steps that could risk your position.
Understanding your rights around garden leave is crucial before signing any settlement agreement. This guide has set out everything you need to know—your pay and benefits, notice period, tax treatment, redundancy entitlement, and exactly how restrictive covenants might limit your next move. We have explained why the legal advice process is mandatory, what traps to avoid, and how our solicitors help you negotiate a package that protects your career and finances.
With our service, all legal advice for your garden leave settlement agreement is entirely free to you as an employee, with the employer covering our fixed fees. Our SRA-regulated solicitors offer rapid, remote appointments—often same-day—so you can get clarity, review your draft agreement, and finalise everything securely from your home or workplace.
For clear advice and expert negotiation of your garden leave settlement, call Settlement Agreement Lawyers on 0800 054 1144, or book your settlement agreement advice online for a same-day remote ILA appointment.
