Garden Leave After Dismissal: Your Rights

What does garden leave after dismissal mean?

Garden leave means you no longer have to work, but you remain employed and continue to be paid until the agreed end date. After a dismissal, many employers want you to stop coming into the workplace, lose access to clients, data, and colleagues, and spend the remaining notice period at home. Legally, your employer is waiving your work performance, without anything changing about your right to pay.

It’s important to draw the line: garden leave doesn’t end your employment. It continues completely normally until the notice period expires, with all rights and obligations except the duty to work. You keep getting paid, stay covered by social insurance, and, for example, can’t simply start working for a competitor while a non-compete clause in your current contract still applies. You’ll find a compact definition in our glossary under Garden Leave.

In principle, you even have a right to actual employment, which the Federal Labour Court derives from your personality rights. Your employer therefore can’t simply send you home without reason. They may only do so if their interest in the release outweighs your interest in working, for example because of lost trust, protecting against competition, or a sensitive position. After a dismissal that’s often the case, and in a termination agreement garden leave is usually agreed by consent anyway.

Revocable or irrevocable: the decisive distinction

Almost everything your garden leave is worth to you hinges on a single word: whether your employer is allowed to call you back.

Revocable garden leave

With revocable garden leave, your employer reserves the right to call you back to work at any time, so you have to stay reachable and ready. This lack of planning certainty has an important consequence: revocable garden leave doesn’t satisfy your holiday entitlement. If you can be called back at any moment, you haven’t taken holiday in the legal sense. So your outstanding holiday survives and must be paid out additionally at the end.

Irrevocable garden leave

With irrevocable garden leave, the release is final. Your employer can’t call you back, and you have certainty for the entire remaining contract term. Only this version can settle holiday, and only it generally ends compulsory insured employment for social security purposes. From an employee’s perspective, irrevocable garden leave is therefore almost always preferable, because it creates clarity and clears the way to a new job.

Practical tip: read the dismissal or release letter word for word. If it only says “released”, without “irrevocable”, you should assume, in case of doubt, that it’s revocable, with all the downsides for holiday and planning. Insist during negotiations on the explicit wording “irrevocable”.

Offsetting holiday and outstanding leave

The most common point of dispute around garden leave is holiday. Many employers assume that garden leave automatically uses up any outstanding holiday. That’s only true under two conditions, and both must be met:

• The release is irrevocable, and
• the employer expressly states that it’s offset against your holiday entitlement.

A clean, standard wording reads roughly: “From DD.MM.YYYY you are irrevocably released from the duty to work, continuing to receive your pay, with your outstanding X days of holiday offset against this period.” If the holiday offset clause is missing, your holiday entitlement survives, even with irrevocable garden leave, and must be paid out in money in addition at the end.

There’s also a special rule about timing: according to the Federal Labour Court, an employer who wants to grant holiday as part of garden leave must make clear to the employee that the period counts as holiday, and must structure the release so the holiday falls at the start of the release period, where it can’t be put at risk by a revocation. That’s exactly why holiday only works with the irrevocable version. For how many days you’re actually entitled to and how the payout is calculated, read the details under Outstanding Holiday on Dismissal.

Important: check whether the number of holiday days stated in the release letter matches your own calculation. If too much holiday is offset, you lose out on payment. If holiday isn’t clearly regulated at all, you may be entitled to it in addition at the end.

Offsetting other earnings (§ 615 sentence 2 BGB)

The second major point concerns money you earn elsewhere during garden leave. The legal basis is § 615 BGB: if your employer waives your work performance, they fall into default of acceptance and must keep paying you. Sentence 2 of this provision, however, contains a restriction that surprises many people.

Under § 615 sentence 2 BGB, you must accept the offsetting against your ongoing salary of whatever you save by not working, or earn through other use of your labour, or maliciously fail to earn. In practice: if you start with a new employer during garden leave, what you earn there can be deducted from your old salary. In the worst case, you earn at the new job but lose exactly the same amount of your old entitlement.

The way out is “without offsetting”. If the release is expressly agreed as irrevocable and waives the offsetting of other earnings, § 615 sentence 2 BGB doesn’t apply. You can then keep your full old salary until the end date while also earning from a new job. This is exactly one of the most important clauses fought over in a termination agreement, because it decides whether starting a new job early costs you money or pays off twice over.

Remember: without an express rule, § 615 sentence 2 BGB applies, meaning offsetting. If you already have a new job in sight, you should either push through a waiver of offsetting or work with a turbo clause, more on that below.

Garden leave, social security, and unemployment benefit

One point that’s often overlooked, but matters for your planning, requires a clean separation of two levels. For contribution purposes, with paid irrevocable garden leave you remain insured until the contract legally ends: health, long-term care, and pension insurance contributions continue to be paid from your continued salary, as the Federal Social Court expressly confirmed (BSG, judgment of 24 September 2008, B 12 KR 22/07 R). For benefit purposes, however, you already count as unemployed from the start of the irrevocable release, because actual work is missing. It’s this benefit-related level that matters for your unemployment benefit.

For you, that mainly means: register with the employment agency early. Under § 38 SGB III, you must register as a jobseeker at least three months before the end, or within three days of finding out if the notice is shorter. A late registration can trigger its own one-week benefit suspension period.

Garden leave itself doesn’t trigger a benefit suspension period under § 159 SGB III. What always matters for a possible suspension period is how the employment ended. If garden leave was agreed within a termination agreement, the termination itself can trigger a suspension period, more on that below and in detail under Benefit Suspension Period on Unemployment Benefit, and, for cases of resigning yourself, under Resigning Yourself: Benefit Suspension.

Garden leave in termination agreements, settlement agreements, and court settlements

In practice, you’ll almost never encounter garden leave as an isolated order, but as part of an overall agreement: in a termination agreement, in a settlement agreement following a dismissal, or in a court settlement that ends an unfair dismissal claim. And precisely because it’s part of an agreement, it’s negotiable.

A typical garden leave clause bundles several points, all of which are worth money. Make sure each one is expressly regulated:

• Irrevocable, so you have planning certainty and holiday can be settled at all.
• With continued pay, so your full salary keeps running until the end.
• Offsetting of outstanding holiday with the correct number of days, or expressly no offsetting.
• Without offsetting other earnings, if you want to start a new job early and keep both.
• Treatment of variable pay, bonuses, and a company car during the release.

Watch out for the full and final settlement clause. If the agreement ends with a sentence like “upon fulfilment of this agreement all mutual claims are settled”, your outstanding holiday or other unpaid wages can quietly disappear into it. Insist that holiday and garden leave are expressly regulated with exact figures. You’ll find sample wording and the typical pitfalls under Termination Agreement: Template.

Important: you can challenge a dismissal with an unfair dismissal claim and have its validity reviewed by a court. A termination or settlement agreement, once signed, is almost impossible to undo: there’s no right of withdrawal for it, and challenging it only succeeds in narrow exceptional cases. So never sign on the spot, take the draft away, and have it checked. Whether ending things via a termination agreement or a dismissal makes more sense is explained under Termination Agreement or Dismissal.

Garden leave as a severance lever: turbo and sprinter clauses

A long, paid garden leave is cash in hand, and it can be factored into the negotiation over your severance pay. The classic lever is the turbo clause, often also called a sprinter clause.

The idea: if you find a new job before the actual end date, you can end the employment early. The salary your employer saves for the remaining release period is then paid out, in whole or in part, as additional severance pay. That turns quiet waiting time into a solid sum, while you also earn at your new job.

It’s worth doing the maths. With six months remaining and a gross salary of €4,500 a month, that’s up to €27,000 that would otherwise simply pass by as garden leave salary. How much such a clause lifts your overall severance pay depends on your negotiating room, which you can gauge with the rule of thumb and table under Severance Pay: Amount.

Draft it cleanly: the turbo clause should make clear that outstanding holiday is already settled, that the early termination doesn’t put your unemployment benefit at risk, and that the extra payment counts as part of your severance pay. Also watch the interplay with Termination Agreement and Unemployment Benefit, so the earlier end date doesn’t unintentionally trigger a suspension period or a hold on your claim.

What’s realistic in your case? Use our severance calculator to work out your personal guide figure in 2 minutes, with the remaining garden leave added on top as extra negotiating weight.

What you should do now

You’ll find the general guide for after a dismissal under Received a Dismissal: What Now? Here are the steps specifically for garden leave:

1. Read the letter word for word. Does it say “irrevocable”? Is holiday expressly offset? Is the offsetting of other earnings regulated or excluded?
2. Recalculate your outstanding holiday. Compare the number of days stated in the letter with your own calculation, so you don’t lose out on payment.
3. Think through a new job and offsetting together. If you want to start a new job early, you need either a waiver of offsetting or a turbo clause, otherwise the new earnings will reduce your old salary.
4. Register as a jobseeker in good time. At least three months before the end, or within three days of finding out if the notice is shorter, otherwise you risk an additional one-week benefit suspension period.
5. Don’t sign anything on the spot. Take the draft away and have garden leave, holiday, offsetting, and severance pay checked together, they’re all connected.
6. Keep the 3-week deadline in mind. If you want to challenge the dismissal itself, you must file an unfair dismissal claim within three weeks of receiving it. If you miss it, the dismissal is generally treated as valid; only in narrow exceptional cases does § 5 KSchG allow a late claim to be admitted. Don’t rely on that, meet the deadline instead.

How can we help you?

Garden leave looks harmless, but it decides a whole range of amounts: your outstanding holiday, whether a new job reduces your salary, and the size of your severance pay if you push through a turbo clause. We review your case together with lawyers specialising in employment law: is the garden leave irrevocable? Is holiday cleanly offset? Is offsetting of other earnings excluded? And can the remaining release period be converted into higher severance pay?

We carry the risk: purely success-based, with no upfront cost, paid only on success. Start with an initial assessment using our severance calculator, it only takes 2 minutes. And if a dismissal is also on the table: remember the 3-week deadline, it runs from the day you receive it.