Garden Leave and Pay In Lieu of Notice (PILON)

There are times when either an employee has resigned from their position, or they have been dismissed by the company that the company do not require the employee to work their notice of employment. There are two options available to employers to enable the employee to not work their notice period, these are:

  • Garden leave;
  • Pay in Lieu of Notice

Garden Leave

Garden Leave is when an employee is required to serve their notice period at home, rather than attending the workplace.

Garden Leave is usually used as a protective measure to prevent an employee who is leaving having access to information or sensitive date that would be useful to a competitor or that would assist that employee setting up in competition with the employer.

While on Garden Leave an employee must be available to work during their normal working hours. The employee will receive their normal salary and have their normal contractual rights. They are obliged to perform any duties requested by the employer which could include being asked to return to work or to answer any queries. The employee is not permitted to take up new employment during any period of Garden Leave.

A period of Garden Leave cannot exceed normal notice period.

For employers to instruct employees to stay away from the workplace and be placed on Garden Leave depends on if there is a specific clause in the contract of employment and if the application of the leave is reasonable. A Garden Leave clause may be in addition to a ‘non-compete’ or restricted covenant clause in the contract of employment.

Where there is no Garden Leave clause in the contract of employment an employee could potentially argue that being placed on Garden Leave is a repudiatory breach of contract and may be able to claim constructive dismissal.

Pay in Lieu of Notice

Pay in Lieu of Notice (PILON) is where an employer terminates an employee’s contract of employment with immediate effect and pays their notice pay, rather than them having to work their notice period. The payment in lieu is owed to the employee as a debt under their contract of employment.

If a termination is due to gross misconduct, PILON is normally not paid.

There are several reasons an employer may wish to make a PILON these include:

  • It removes the employee from the workplace immediately therefore preventing access to sensitive information;
  • The employees continued employment could negatively affect other team members and the company;
  • It is part of a negotiated agreement between the employer and employee.

There must be a PILON clause in an employee’s contract of employment to be able to make such a payment. If a payment is made without a clause, then the employer will be in breach of contract by preventing the employee from working.

A PILON Clause should include:

  • Stating a dismissal can be made immediately with a PILON for the duration of the notice period;
  • Confirm what payments are to be made, for example bonuses and holiday pay
  • State how and when the payment will be made.

If you would like further guidance or information, please contact Clover HR on 0121 516 0299 or email us at info@cloverhr.co.uk


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