Garden leave vs PILON

What is garden leave?

The employee serves their notice at home. They remain employed on full pay and all contractual terms continue to apply - confidentiality, the duty of fidelity, restrictions on working elsewhere. They simply have no duties to perform.

It is used when someone has resigned for a competitor, has access to sensitive information or client relationships, or where having them in the building through a long notice period is unhelpful for everyone.

PILON vs garden leave: which should you use?

Do you need a clause?

For both, in practice yes.

• Garden leave without an express clause is risky: sending someone home when the contract does not allow it can itself be a breach, and a breach by the employer can undermine the very restrictive covenants you were trying to protect.
• PILON without a clause means ending the contract early is technically a breach, with the payment being damages rather than contractual pay. Since 2018 the tax outcome is much the same either way, thanks to PENP - but the contractual position is not.

Some roles also carry a stronger argument for a "right to work" - people whose skills decay without practice - which is another reason to have the clause rather than rely on goodwill.

What still applies during garden leave?

• Full pay and benefits, unless the contract genuinely says otherwise.
• Holiday accrual continues. Many contracts let the employer require accrued leave to be taken during garden leave, which is worth using - otherwise it is all paid out at the end.
• Contractual duties, including confidentiality and not working for anyone else.
• Reasonable contact. They are still employed, so occasional handover questions are fair - though the point of garden leave is distance.

How long can garden leave last?

No longer than the notice period, and courts have been unsympathetic to very long periods that look like restraint of trade by another name. A garden leave clause paired with restrictive covenants often includes a set-off, so time spent on garden leave counts against the covenant period - without it, the combined effect can be long enough that a court will not enforce it.

Related: the notice pay calculator for the statutory ladder, ex-gratia payments and the £30,000 rule for the settlement side, and the leaver holiday calculator for what has to be paid out.

Sources

Checked against the primary source on 13 September 2026. Where a figure or rule on this page comes from statute or official guidance, this is where it comes from:

• Income Tax (Earnings and Pensions) Act 2003, s.402D - post-employment notice pay, which is why PILON is taxed in full
• Employment Rights Act 1996, s.86 - the statutory minimum notice ladder
• gov.uk: garden leave - what an employer can and cannot require during the period

Frequently asked questions

What is the difference between garden leave and PILON?

On garden leave the employment continues to the end of the notice period - the person stays employed, paid and bound by their contract but does not attend work. With a payment in lieu of notice the employment ends immediately and the notice is paid as a lump sum.

Does an employer need a garden leave clause?

In practice yes. Sending someone home when the contract does not provide for it can be a breach, and a breach by the employer can undermine the restrictive covenants the garden leave was meant to protect.

Does holiday accrue during garden leave?

Yes - the employee is still employed, so statutory holiday continues to accrue. Many contracts allow the employer to require accrued leave to be taken during garden leave, which reduces what has to be paid out at the end.

Is a PILON taxable?

Yes. Payments in lieu of notice are treated as earnings and taxed in full with National Insurance. Since the post-employment notice pay rules were introduced they cannot be sheltered by the £30,000 termination exemption.