What is the difference between pay in lieu of notice (PILON) and garden leave?

We’ve had a number of conversations with clients recently where PILON and garden leave are being used interchangeably, but they are very different, and using the wrong approach can create risk. At a basic level, the difference comes down to one key point, whether the employment relationship continues or ends immediately.

Where PILON is used, the employment ends straight away. The employee does not work their notice period and instead receives a payment equivalent to what they would have earned during that time.

Because the employment has ended, the contract also comes to an end at that point. This means the employee is free to start working elsewhere immediately, unless there are post-termination restrictions in place, such as confidentiality clauses or restrictive covenants.

This is where employers need to be careful. If there is no PILON clause in the contract, ending employment early and making a payment instead can technically be a breach of contract. In those circumstances, there is also a risk that restrictive covenants may not be enforceable.

In short, PILON gives a clean break but only where the contract allows it.

Garden leave works very differently. The employee remains employed throughout their notice period but is not required to attend work.

During this time, they:

continue to receive full pay and benefits
remain bound by their contract
are still subject to company policies and obligations
they are also not free to work elsewhere, as they are still employed.

Garden leave is often used where there are concerns about protecting the business, for example, client relationships, confidential information, or team stability, while still maintaining control over the employee during their notice period. Although both options remove the employee from the workplace, they achieve very different outcomes.

PILON brings the employment to an immediate end, which can be useful where a clean break is needed. Garden leave, on the other hand, keeps the employee tied to the business for the duration of their notice, which can offer greater protection.

Choosing the wrong option or applying one without the correct contractual wording can weaken your position, particularly when it comes to enforcing restrictions after employment ends. Neither approach is “better” it depends on the situation and what you are trying to protect as a business. The key is understanding the difference and checking what your contracts allow before making a decision.

If you’re unsure which route is appropriate, or whether your contracts support it, it’s worth sense-checking this before acting it’s a small step that can prevent bigger issues later. If you have any concerns about this subject contact us at enquiries@121hrsolutions.co.uk and we can discuss.

What is the difference between pay in lieu of notice (PILON) and garden leave?

121 HR Solutions Ltd