Garden leave and pay in lieu of notice, explained

Your notice period comes from your agreement

Employment New Zealand is clear on the starting point: if your employment agreement sets a notice period, that is the notice that must be given, by you when you resign and by your employer when it ends your employment (other than for serious misconduct). If the agreement says nothing, reasonable notice applies. There is no fixed length, but 2 to 4 weeks is generally seen as reasonable, depending on the role, how long you have been there and how easy it will be to replace you or for you to find work.

A shorter or longer notice period needs both of you to agree. If your employer wants you gone sooner and you do not agree, it must still pay you for the full notice period. It works the other way too: if you ask to leave early and your employer agrees, you are paid only for the part you worked. Some agreements also say leave taken during notice does not count towards it, so read yours.

In Your Career, the Your job section shows your notice period in weeks, taken from your agreement, next to the dates that matter in the job.

Garden leave: still employed, paid, and kept away

Employment New Zealand's name for garden leave is "leave in lieu of notice". Employment legislation does not mention it: it is an arrangement between you and your employer. You remain employed and on full pay for the notice period but do not come to work. It is not annual leave and does not use your holiday entitlement. It needs agreement, through a clause in your employment agreement or when notice is given, and that agreement must be recorded in writing.

While you are on garden leave you are still bound by your agreement, including any lawful restriction on working for another employer. Your employer can also limit your access to systems, information, clients and property. Employers may use it when someone is moving to a competitor, or when being at work during notice would be awkward for everyone. It should not be used to get around the rules for suspension.

Pay in lieu of notice: paid out, and the job ends now

With pay in lieu of notice, your employment ends when notice is given, and you are paid for the notice period instead of working it. The payment comes in your final pay. Like garden leave, it needs agreement, and the agreement should be in writing.

The two are easy to confuse, but the difference matters. On garden leave you are an employee until the last day of notice. With pay in lieu, you are not. If your employer ends your job without notice, and without an agreed arrangement like either of these, you may be able to raise a personal grievance, unless it was a dismissal for serious misconduct.

What each means for a new job, holiday pay and tax

Starting a new job. On garden leave you are still employed, so you cannot start somewhere else if your agreement restricts it, and your start date is normally after notice ends unless your employer agrees otherwise. With pay in lieu your employment has already ended, so you are free to start, subject to any restraint of trade in your agreement.

Holiday pay. Garden leave does not use your annual holidays. In either case, holiday pay you are owed comes with your final pay, on or before the pay day of your final pay period. The difference is when that is: at the end of the notice period on garden leave, or straight away with pay in lieu. The Holidays Act 2003 still sets these rules until the Employment Leave Act 2026 replaces it on 6 August 2028.

Tax. Garden leave is paid as your normal salary, with PAYE as usual. Pay in lieu is employment income too, but it usually arrives as one sum. Inland Revenue's list of lump sums does not name it, but a one-off payment outside your regular pay fits the Income Tax Act's definition of an "extra pay", so it is generally taxed as a lump sum. Inland Revenue tells employers how to work out the rate on lump sums paid when employment ends.

When your employer asks for either

Check your agreement first. If it has a clause allowing garden leave or pay in lieu, your employer can use it, though it must act fairly and reasonably. If it does not, it needs your agreement, and you can say no and work your notice instead. You can also ask for garden leave yourself, though your employer does not have to agree.

Whatever you agree, get it in writing:

Offer a proper handover before you go, even if you are sent home early; our article on how to hand over a job sets one out, and our article on how to resign covers the letter itself. If your employer is pressing you to agree and you are unsure, Employment New Zealand (0800 20 90 20), Community Law, your union or an employment lawyer can advise. The demo, which needs no account, shows a current job with a four-week notice period.

Keep your notice, your dates and the offer together