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Garden Leave vs Payment in Lieu of Notice (PILON) Cost Calculator

Compare what it costs an employer to put a leaver on garden leave versus paying in lieu of notice — salary, employer taxes, pension and benefits, bonus and holiday accrual over the notice period — and see the employee's side: pay, restrictive-covenant protection and the earliest start date with a new employer.

Annual salary

Notice period

Employer on-costs (payroll tax, pension, insurance)

Benefits in kind per month (car, health, allowances)

Bonus that would accrue over the notice period

Holiday accruing per year

Does PILON include benefits?

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How it works

garden leave = (salary ÷ 12 × months) × (1 + on-costs) + benefits × months + bonus accrual + holiday accrual · PILON = notice salary (± benefits per the clause) × (1 + on-costs)

When someone senior resigns, the employer can let them work their notice, send them home on full pay (garden leave) or pay the notice as a lump sum and end the contract at once (payment in lieu). Garden leave keeps the employee bound by their contract — they cannot work for anyone else and remain under confidentiality duties — which is valuable when they are joining a competitor, but it means paying salary, benefits, pension and accruing bonus and holiday for someone doing nothing. A payment in lieu is usually cheaper because benefits and accruals stop, but it needs a contractual clause to be lawful and it frees the employee immediately. Pricing both options per day makes the trade-off between cost and protection explicit.

Worked example

A $90,000 employee with three months' notice, 18% on-costs, $400 a month of benefits and 25 days' annual leave costs $22,500 in salary, $4,050 in on-costs, $1,200 in benefits and about $2,163 in accrued holiday on garden leave — $29,900, or $328 a day. A basic-salary PILON costs $26,550, saving about $3,350 (11%) but ending the covenants' head start.

Frequently asked questions

Can an employer impose garden leave without a clause?

Often not: without an express clause, sending an employee home may breach the right to work (especially for roles where skills or reputation depend on working). Most modern senior contracts include both garden-leave and PILON clauses.

Is PILON tax-free?

Generally no. Many jurisdictions tax all notice pay as earnings whether worked or not (the UK's PENP rules since 2018); genuine redundancy or compensation payments may have separate exemptions.

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General rules and common conventions; employment contracts, immigration law and tax residency tests vary by country and change over time. Check the current official rules (or a professional) before relying on a date or a number.