Garden Leave After Dismissal: Your Rights

What Does Garden Leave After Dismissal Mean?

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

It is important to distinguish this: garden leave does not end your employment relationship. It continues completely normally until the notice period runs out, with all rights and duties except the duty to work. You keep getting your salary, you remain covered by social insurance, and you may not, for instance, simply start working for a competitor while the non-compete clause of your ongoing contract applies. You can 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 may not send you home without reason. They may only do so if their interest in the release outweighs your interest in being employed, for example because of a loss of trust, competition concerns, or a sensitive position. After a dismissal, this is often the case, and in a termination agreement the release is usually agreed by mutual consent anyway.

Revocable or Irrevocable: the Key Distinction

Almost everything that 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. You must therefore remain reachable and ready to work. This lack of planning certainty has one important consequence: revocable garden leave does not satisfy your holiday entitlement. Anyone who can be called back at any time has not taken holiday within the meaning of the law. Your remaining holiday therefore stays intact and must be paid out separately at the end.

Irrevocable Garden Leave

With irrevocable garden leave, the release is final. Your employer cannot call you back, and you have certainty for the entire remaining contract period. Only this variant can satisfy your holiday entitlement, and only it usually ends your compulsorily insured employment for social insurance purposes. From an employee's perspective, irrevocable garden leave is therefore almost always the better option, 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 "irrevocably", you should assume, when in doubt, that it is revocable garden leave, with all the disadvantages for holiday and planning. Insist during negotiations on the explicit wording "irrevocable".

Offsetting of Holiday and Remaining Holiday

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

• The release is irrevocable, and
• your employer expressly declares an offset against your holiday entitlement.

A clean, standard wording reads roughly: "From DD.MM.YYYY, you are released irrevocably from your work duties, with continued pay, and with the remaining X days of holiday counted against this period." If the addition about holiday offsetting is missing, your holiday entitlement remains, even with an irrevocable release, and must be paid out in money at the end in addition.

There is a particular nuance around order: according to Federal Labour Court case law, an employer who wants to grant holiday as part of a release must make it clear to the employee that the time is meant to count as holiday, and must arrange the release so that the holiday falls at the beginning of the release period and is not put at risk by a revocation. That is exactly why holiday only works with the irrevocable variant. You can read the details on how many days you are entitled to and how the pay-out is calculated under Remaining Holiday on Dismissal.

Important: check whether the number of holiday days named in the release letter matches your own calculation. If too much holiday is offset, you lose out on pay-out. If no holiday is cleanly regulated at all, it may end up owed to you additionally at the end.

Offsetting of Other Earnings (§ 615 Sentence 2 BGB)

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

Under § 615 sentence 2 BGB, you must accept an offset against your continuing salary for whatever you save as a result of not working, or earn through other use of your labour, or deliberately fail to earn. In plain terms: if you start with a new employer during your garden leave, the earnings there can be deducted from your old salary. In the worst case, you earn at the new job but lose an equal amount of your old entitlement.

The way out is "without offsetting". If the release is agreed expressly as irrevocable and with a waiver of offsetting other earnings, § 615 sentence 2 BGB does not apply. In that case, you keep your old salary in full until the termination date and can earn elsewhere at the same time. This is exactly one of the key sentences fought over in a termination agreement, because it decides whether an early follow-up job costs you money or pays off twice over.

Remember: without an express arrangement, § 615 sentence 2 BGB applies, meaning offsetting takes place. Anyone with a new job in sight should therefore either push through the waiver of offsetting or work with a turbo clause, more on that below.

Garden Leave, Social Insurance, and Unemployment Benefit

One point that is often overlooked, but matters for your planning, requires a clean distinction between two levels. For contribution purposes, with a paid, irrevocable release, you remain insured until the legal end of the contract: contributions to health, long-term care, and pension insurance continue to be paid from your continuing salary, as the Federal Social Court has explicitly confirmed (Federal Social Court, 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 there is no actual work being performed. This second, benefit level is what matters for your unemployment benefit.

For you, this means above all: take care of registering with the employment agency early. Under § 38 SGB III, you must register as a jobseeker at least three months before the end of employment, or within three days of finding out if the notice is shorter. Registering late can trigger a separate, one-week benefit suspension period.

Garden leave as such does not trigger a benefit suspension period under § 159 SGB III. What always matters for a possible suspension period is how the employment relationship was ended. If the release was agreed as part of a termination agreement, the ending itself can trigger a suspension period, more on that below, and in full detail under Benefit Suspension Period on Unemployment Benefit as well as, for cases of resigning yourself, under Resigned Yourself: Benefit Suspension.

Garden Leave in a Termination Agreement, Settlement Agreement, or Court Settlement

In practice, you will almost never encounter garden leave as an isolated instruction, but as a building block 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 is part of an agreement, it is 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 actually be satisfied.
• With continued pay, so your full salary keeps running until the end.
• Offsetting of remaining 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 company cars during the release.

Be careful with the settlement clause. If a sentence at the end of the agreement reads something like "on fulfilment of this agreement, all mutual claims are settled", your remaining holiday or other outstanding pay can quietly disappear within it. Insist that holiday and garden leave are regulated expressly and with figures attached. You will find sample wording and the typical pitfalls under Termination Agreement: Sample.

Important: you can challenge a dismissal with an unfair dismissal claim and have its validity reviewed by a court. A termination or settlement agreement you have already signed, however, is very hard to get out of: there is no right of withdrawal for it, and rescinding it only succeeds in narrow exceptional cases. So never sign on the spot, take the draft away with you, and have it reviewed. You can read whether ending the employment through a termination agreement or a dismissal makes more sense 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 brought 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 termination date, you can end the employment relationship early. The salary your employer saves for the remaining period of garden leave is then paid out, in whole or in part, as additional severance. Quiet waiting time turns into a solid sum, and at the same time you earn from your new job.

Do the maths for yourself. With six months of remaining time and a gross monthly salary of €4,500, this can amount to up to €27,000 that would otherwise simply pass by as garden leave pay. How much such a clause raises your overall severance depends on the negotiating room you have, which you can gauge under Severance Pay: Amount using our rule of thumb and table.

Draft it cleanly: the turbo clause should make clear that remaining holiday is already settled, that the early ending does not put your unemployment benefit at risk, and that the additional payment counts as part of the severance. Also pay attention to how it interacts with Termination Agreement and Unemployment Benefit, so that the earlier ending does not unintentionally trigger a suspension period or a pause in your entitlement.

What is realistic in your case? Use our severance calculator to work out your personal ballpark figure in 2 minutes, with the remaining garden leave added on top as negotiating leverage.

What You Should Do Now

You can find the general guide to what to do after a dismissal under Received a Dismissal: What Now? Here are the steps specific to 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 remaining holiday. Compare the number of days stated in the letter with your own calculation, so you don't lose out on any pay-out.
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 with you and have the release, holiday, offsetting, and severance reviewed together, since they are all connected.
6. Keep the 3-week deadline in mind. If you want to take action against the dismissal itself, you must bring an unfair dismissal claim within three weeks of receiving it. If you miss it, the dismissal generally counts as valid; only in narrow exceptional cases does § 5 KSchG allow a late admission of the claim. Don't rely on that, keep to the deadline.

How Can We Help You?

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

We carry the risk: purely success-based, at no upfront cost. Start with a first assessment using our severance calculator, it only takes 2 minutes. And if a dismissal is on the table at the same time: keep the 3-week deadline in mind, it runs from the day you receive it.