Termination Essentials

NZPPA Certificate in Payroll Termination Essentials (Level 4)

Additional special agreed terms

Two special terms that payroll may encounter in a termination section are Garden Leave and the need to recover from a Bonding Agreement that an employee entered into.

Garden Leave

In this context, garden leave is a period of time-related to an employee's termination. If an employee is put on Garden Leave, it is by agreement between the employer and the employee (usually as a clause in the employee employment agreement). The common purpose of garden leave is when an employee has resigned and plans to work for a competitor and is now working out their notice period. In this situation, the employer does not want the employee to start working for the competitor straight away and wants the additional time (notice) to keep the existing employee under their control. However, because of the work the employee does (access to commercially sensitive information), their present employer does not want them to continue in the workplace, hence wanting them to be on garden leave (usually at their home).

So, in plain language, it is completing notice at home.

There may be agreed rules in place regarding what the employee can and cannot do while on garden leave, and this would be part of the garden leave clause. Also, what work (if any) the employee does while at home on garden leave is another part also agreed.

What does garden leave mean for payroll?

• While on garden leave, the employee gets paid their agreed wage or salary.

• Any other payments that the employee would have received if they were working in the workplace they still receive while at home (allowances: car, travel, etc.) as per their employment agreement. The employee on garden leave cannot be disadvantaged (get paid less) unless this is part of the garden leave clause.

© New Zealand Payroll Practitioners Association, Mar 2026, Ver 9

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