The following Employment Tax guidance note by Tolley in partnership with Emilie Bennetts at Charles Russell Speechlys LLP provides comprehensive and up to date tax information covering:
Note: the case references in this guidance note are all subscription sensitive.
Putting someone on ‘garden leave’ means sending them home on full pay during their notice period. This can be done when an employee resigns or when he is dismissed with notice.
In some situations, employees are pleased to be sent on garden leave and no difficulties arise. However, there are circumstances in which garden leave can be a major area of dispute, often because the employee wants to leave work immediately in order to work for a competitor.
An employee may also object to being put on garden leave where this will cause him financial loss, cause him to become de-skilled or make it more difficult for him to find a new job. In this situation, there may be a right to work during his notice period unless the employer has a clear contractual right to require the employee to go on garden leave.
The main reason why employees are put on garden leave is to remove them from the workplace during the notice period, while preventing them from working for a competitor. Garden leave therefore tends to be used more frequently for senior staff, who might cause more harm by working for a competitor. Garden leave will keep the employee out of the marketplace so that any sensitive information they have will go out of date. It could also help the employee’s successor to establish themselves, to help protect the employer’s goodwill.
A senior employee who has been ‘disconnected’ from the work place during his notice period will be less likely to be able to poach a client when that garden leave ends, especially if the employer has had an opportunity to maintain customer good will and relationships by utilising other employees.
Because the employee remains employed and therefore under
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