TRW & Co · Employment law
Garden Leave and Payment in Lieu of Notice in Singapore
Garden leave in Singapore keeps a departing employee employed and paid but away from work during notice; payment in lieu ends employment immediately. Neither is created by the Employment Act. The choice affects CPF, when the employee can join a competitor and whether your post-termination non-compete and non-solicitation restraints will hold.
Key pointGarden leave and a post-termination non-compete together keep an employee out of the market; a set-off clause that deducts garden leave from the non-compete makes the overall restraint far more likely to be upheld.
At a glance
Contract, not statute
Garden leave depends on an express contractual clause; the Employment Act only sets fallback notice periods and allows salary in lieu of notice.
Statutory notice fallback
Where the contract is silent, MOM lists one day to four weeks' notice depending on service, from under 26 weeks to five years or more.
CPF treatment differs
Garden leave pay is ordinary salary during employment, while MOM states that salary in lieu of notice is not subject to CPF contributions.
Restraints run later
Post-termination restraints start when employment ends, so garden leave extends the time out of the market unless a set-off clause applies.
One-month claim window
Wrongful dismissal claims must be filed at TADM within one month of the last day; managers dismissed with notice need six months' service.
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The short answer: garden leave versus payment in lieu
Garden leave in Singapore is a contractual arrangement under which an employee who has resigned or been given notice stays employed and paid for the notice period but is told not to come to work, contact clients or do any work. Payment in lieu of notice (PILON) is the opposite approach: the employment ends immediately and the employer pays the salary the employee would have earned during the notice period.
Neither tool is created by the Employment Act. Garden leave depends on an express clause in the contract; payment in lieu is recognised by the Ministry of Manpower as a way for either party to end the contract without waiting for notice to run. The choice between them affects when the employee is free to join a competitor, how long post-termination restraints run, CPF, and the employer's leverage if things go wrong.
This guide explains how each mechanism works, how to calculate a salary-in-lieu payment, and how garden leave interacts with non-compete and non-solicitation covenants.
The legal framework
The Employment Act 1968 sets minimum notice periods where the contract is silent and allows either party to end the contract by paying salary in lieu of notice. According to the Ministry of Manpower, the statutory minimums, which apply only if the contract does not specify a notice period, are as follows.
| Length of service | Minimum notice |
|---|---|
| Less than 26 weeks | 1 day |
| 26 weeks to less than 2 years | 1 week |
| 2 years to less than 5 years | 2 weeks |
| 5 years or more | 4 weeks |
Professional and executive contracts commonly specify longer notice, particularly for senior roles, and that contractual period governs. Notice can be waived by mutual consent, which MOM says should be recorded in writing.
Garden leave in Singapore is governed by contract and general common law principles rather than by statute. Those principles include the employee's continuing duties of fidelity and confidentiality during employment, and the court's discretion over whether to enforce a clause by injunction. MOM also notes that contractual compensation for ending a contract early is not covered by the Employment Act, so disputes about it are contract claims. Our page on employment contracts covers drafting of notice provisions.
How garden leave in Singapore works in practice
During garden leave the employee remains an employee. That has three consequences that employers often overlook.
Full pay and benefits continue
Salary, contractual allowances, insurance and other benefits continue unless the contract provides otherwise. Because the employee is still employed, normal CPF contributions apply to the salary paid.
Duties of fidelity continue
The employee remains bound by implied duties of good faith and fidelity and by express confidentiality terms. They cannot work for a competitor during garden leave, which is the main commercial attraction.
The employer controls access
A well-drafted clause lets the employer remove system access, require return of devices, bar contact with clients and colleagues, and assign no duties, or limited handover duties.
The pass and status remain live
A work pass holder remains employed, so the pass should stay valid until the last day. Cancellation and repatriation steps follow the end of employment, not the start of garden leave.
Without an express garden leave clause, an employer that sends an employee home on full pay may face an argument that it has breached the contract, particularly where the employee's skills or reputation depend on actively working. The safer course is to include an express right in every senior contract.
Drafting a garden leave clause
A garden leave clause that works in practice usually covers more than the right to send the employee home. Employers should consider including the following elements when drafting for garden leave in Singapore:
- A right to require the employee not to attend work, not to perform duties, or to perform only specified handover duties.
- A right to bar contact with clients, suppliers, colleagues and regulators, and to appoint a replacement.
- Confirmation that salary and contractual benefits continue, and how bonus eligibility is treated during the period.
- An obligation to remain available and to return devices, documents and confidential information on request.
- Rules on taking annual leave during the period, and a right to pay in lieu of the balance of notice.
- A set-off provision reducing any post-termination restraint by the time spent on garden leave.
The employee's perspective
For an employee, garden leave in Singapore is often less attractive than it sounds. Skills can go stale, a new employer may not wait, and bonus or equity awards may lapse if the plan treats an employee under notice as ineligible. Employees asked to serve garden leave can sometimes negotiate a shorter period, an earlier PILON, or a release from part of the restraint in exchange for undertakings about clients and confidential information. Any agreement should be recorded in writing, signed by both sides, and should state the termination date clearly.
Payment in lieu of notice: how to calculate it
MOM describes salary in lieu as money equivalent to the salary the employee would have earned during the required notice period. It does not prescribe a formula, so the contract is the starting point. MOM also confirms on its notice guidance that salary in lieu of notice is not subject to CPF contributions.
- Identify the notice period. Use the contractual period, or the statutory minimum if the contract is silent. Check whether different periods apply during probation.
- Read the PILON clause. Many clauses limit the payment to basic salary only. If the clause is silent, consider whether fixed allowances and other contractual pay would have been earned during notice.
- Exclude discretionary items carefully. Discretionary bonuses are usually not part of PILON unless the contract or past practice makes them contractual. Check bonus plan rules, including any "not under notice" conditions.
- Deal with leave. Calculate unused annual leave separately. With agreement, leave can bring forward the last day; MOM notes the leave used is then not paid out.
- Address equity and benefits. Check how share plans, insurance and other benefits treat a PILON termination date versus a later notice expiry date.
- Document and pay. Issue a termination letter that states the termination date, the PILON amount and how it was calculated, and pay promptly with the final salary.
Where an employer simply dismisses without notice and without a PILON clause, the employee's claim is generally for damages for breach of contract. Executives who believe they were dismissed wrongfully can also file a claim at the Tripartite Alliance for Dispute Management (TADM); MOM states the claim must be filed within one month from the last day of employment, and managers and executives dismissed with notice or salary in lieu must have served at least six months to bring one. Our guide to termination notices in Singapore covers the drafting of letters.
Garden leave, PILON or working notice: options compared
| Factor | Working notice | Garden leave | Payment in lieu |
|---|---|---|---|
| Employment ends | At end of notice | At end of notice | Immediately |
| Employee can join competitor | Not until notice ends | Not until notice ends | Immediately, subject to restraints |
| Access to clients and data | Continues | Can be cut off under the clause | Ends |
| CPF on payment | Yes, ordinary salary | Yes, ordinary salary | Not payable on salary in lieu (MOM) |
| Contract basis needed | No | Express garden leave clause recommended | PILON clause or Employment Act right |
| Effect on post-termination restraint | Restraint starts after notice | Restraint starts after notice; may be reduced by set-off | Restraint starts immediately |
The commercial question is how long you need to keep the employee out of the market. Garden leave plus a post-termination restraint can amount to a long period out of work, which a court will consider when deciding whether the overall protection is reasonable. PILON shortens the overall period, but the employee walks out of the door that day.
How garden leave interacts with restraint periods
Post-termination non-compete and non-solicitation clauses are enforceable in Singapore only if they protect a legitimate proprietary interest and are reasonable in scope, area and duration. Our practice page on restrictive covenants explains the test. Garden leave in Singapore matters to that analysis because it is, in substance, a period during which the employee is already kept out of the market.
Three drafting techniques reduce the risk that the combined period is attacked as excessive:
- Set-off clauses. Provide that any period of garden leave is deducted from the length of the post-termination non-compete.
- Proportionate notice. Avoid very long notice periods for mid-level roles where the confidential information or client connections will go stale quickly.
- Separate obligations. Keep garden leave, non-compete, non-solicitation and confidentiality as separate, severable clauses so that one weak clause does not undermine the others.
Remember too that an employer which terminates in serious breach of contract, for example by dismissing without notice where no PILON right exists, risks being unable to rely on post-termination restraints at all. See our guides to restrictive covenants in employment and confidentiality clauses.
Decide on garden leave on the day the resignation arrives, not a week later. The highest-risk window is the first few days after resignation, when an employee may still have system access, client meetings in the diary and colleagues they may try to recruit. A ready-to-use garden leave letter, IT access checklist and client communication plan make the clause effective.
Illustrative scenario: a sales director resigns to join a rival
This scenario is illustrative only; it is not based on any client or real case.
A regional sales director with a three-month notice period and a six-month post-termination non-compete resigns to join a competitor. Her contract has an express garden leave clause and a set-off clause, and allows the employer to pay in lieu of any part of the notice.
The employer places her on garden leave immediately, removes system access and asks her to return devices. It reminds her in writing of her confidentiality and non-solicitation obligations. Two weeks later, the handover is complete and client relationships have been reassigned. The employer then decides to pay in lieu of the remaining notice to save cost, knowing that the set-off clause means the garden leave served reduces the non-compete. It calculates PILON on basic salary as the clause requires, records the calculation, and confirms the termination date for share plan purposes.
Risks and common mistakes
No express garden leave clause
Without an express right, sending an employee home on full pay may be challenged as a breach of contract, and a court may be reluctant to grant an injunction keeping the employee out of a competitor. Including a clear clause in senior contracts is the simplest protection.
If the clause is missing, consider negotiating a garden leave or exit agreement. Our practice page on executive exits covers negotiated departures.
Miscalculating salary in lieu
Errors usually arise from including or excluding allowances inconsistently, ignoring leave, or treating discretionary bonuses as contractual. Because salary in lieu is not subject to CPF but garden leave pay is, mixing the two without clear records also causes payroll problems.
Follow the contract wording, record the calculation in the termination letter and have payroll check CPF treatment.
Overlong combined restraint
A long notice period served on garden leave, followed by a long non-compete, can look disproportionate. The employer then risks losing the non-compete entirely, leaving only confidentiality and non-solicitation protection.
Use set-off clauses and calibrate notice and restraints to the role.
Treating garden leave as a disciplinary step
Garden leave is not suspension and should not be presented as a sanction. If misconduct is suspected, run a fair investigation under the disciplinary process; dismissing summarily without due inquiry can found a wrongful dismissal claim.
Our page on employment disputes explains how such claims proceed.
Cross-border considerations
Regional executives often hold contracts governed by English or other foreign law while working in Singapore. Garden leave concepts are familiar in English law, but the mandatory Singapore rules on notice, salary in lieu and wrongful dismissal claims for employees working here still need to be considered, and enforcement of a restraint will usually be sought where the employee is working.
For employees on Employment Passes, coordinate the exit date with the pass cancellation process and any new employer's application, and remember that a dependant's pass is usually tied to the main pass. Groups with staff across Singapore, Bangladesh, the UAE, China and the UK should keep a single exit playbook with local variations.
What to do next: checklist for employers
- Include an express garden leave clause and a PILON clause in every senior contract.
- Define what salary in lieu covers, and state how leave, bonuses and benefits are treated.
- Add a set-off clause linking garden leave to post-termination restraints.
- Prepare template garden leave and PILON letters and an IT access checklist.
- Confirm CPF treatment for garden leave pay and salary in lieu.
- Align share plan and bonus rules with the termination date.
- Coordinate work pass cancellation and repatriation for foreign employees.
- Review your approach to garden leave in Singapore annually as roles and markets change.
TRW & Co advises employers and executives on garden leave in Singapore, payment in lieu of notice, restrictive covenants and negotiated exits. Where Singapore court or tribunal representation is required, we work alongside Singapore-qualified counsel. To discuss a pending resignation or a contract review, contact our Singapore team.
Frequently asked questions
01Is garden leave legal in Singapore?
Yes, where the employment contract permits it. Garden leave is a contractual arrangement rather than a statutory right, so employers should include an express clause allowing them to require the employee to stay away from work, refrain from contacting clients and perform no duties during notice. Without such a clause, sending an employee home on full pay may be challenged, and courts may be less willing to restrain the employee from joining a competitor.
02Do I get paid during garden leave?
Yes. During garden leave the employee remains employed, so salary and contractual benefits normally continue for the whole notice period unless the contract provides otherwise. Because it is ordinary salary paid during employment, normal CPF contributions apply. The employee also remains bound by duties of fidelity and confidentiality and cannot start work for another employer until the employment ends.
03How is payment in lieu of notice calculated in Singapore?
MOM describes salary in lieu as money equivalent to the salary the employee would have earned during the required notice period, but does not prescribe a formula. Start with the contract: many PILON clauses limit the payment to basic salary. Where the contract is silent, consider fixed contractual allowances, exclude genuinely discretionary bonuses, and calculate unused annual leave separately. Record the calculation in the termination letter.
04Is CPF payable on salary in lieu of notice?
No. MOM states that salary in lieu of notice is not subject to CPF contributions. By contrast, salary paid during garden leave or working notice is ordinary salary paid during employment and attracts CPF in the normal way. Payroll teams should treat the two differently and keep clear records of which applies to each part of an exit payment.
05Does garden leave count towards my non-compete period?
Only if the contract says so. A post-termination non-compete normally starts when employment ends, which is after garden leave. Many well-drafted contracts include a set-off clause that reduces the non-compete by the length of garden leave served. Even without one, a court assessing whether a restraint is reasonable may take into account how long the employee has already been kept out of the market.
06Can my employer put me on garden leave and then pay in lieu of the rest of my notice?
Often yes, if the contract contains both a garden leave clause and a right to pay in lieu of notice or any part of it. Employment then ends on the date the PILON is exercised, and post-termination restraints start from that date. The employee should check how bonuses, share awards and benefits treat that earlier termination date.
Sources and official materials
- MOM – Termination with notice — Statutory notice periods, waiver, leave during notice and CPF on salary in lieu
- MOM – Termination without notice — When salary in lieu of notice can be paid
- MOM – Wrongful dismissal — TADM filing window and eligibility for managers and executives
- MOM – Termination of employment — Overview of termination routes
- Employment Act 1968 (Singapore Statutes Online) — Statutory framework for notice and termination
General information only, current as at 20 October 2026. It is not legal advice and does not create a lawyer–client relationship. Singapore law and regulatory practice change; check current official sources and take advice on the facts of your matter.
