Key Takeaways
- Garden leave is an employment arrangement, generally allowing an employee to remain employed during their notice period without performing some or all normal duties.
- Garden leave is not expressly provided as a statutory entitlement under Malaysia’s Employment Act 1955. Its implementation depends on employment contract terms, applicable laws and individual circumstances.
- Salary and contractual benefits generally continue during garden leave because the employment relationship remains in effect, subject to applicable legal and contractual requirements.
- Employers may use garden leave to protect confidential information, manage employee handovers and limit access to sensitive company systems during the notice period.
- Clear employment contracts and HR documentation matter. Employers should review contractual authority, communicate restrictions in writing and maintain accurate payroll and employee exit records.
When an employee resigns or receives notice of termination, Malaysian employers may need to decide whether the employee should continue working throughout the notice period.
This can be particularly challenging when the employee has access to confidential business information, customer relationships, or sensitive company records.
Garden leave is an arrangement where an employee remains employed during their notice period but is instructed not to perform some or all of their usual duties.
The employee generally continues receiving salary and applicable contractual benefits while remaining subject to employment obligations.
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However, garden leave is not expressly established as a statutory entitlement under Malaysia’s Employment Act 1955. Employers must consider the terms of the employment contract, applicable employment laws, and individual circumstances before implementing such an arrangement.
For small and medium enterprises (SMEs), understanding how garden leave works can help improve employee exit planning, clarify payroll responsibilities, protect business information, and reduce uncertainty over contractual obligations.
1. What Is garden leave in Malaysia?
Garden leave refers to an arrangement where an employee remains employed during their notice period but is not required to perform some or all of their regular duties.
Although the employee may no longer attend the workplace or handle daily responsibilities, the employment relationship generally continues until the agreed termination date.
In Malaysia, employers may consider garden leave when an employee resigns, particularly if their role involves confidential information, important customers, or sensitive business operations.
What Does Garden Leave Mean in Employment?
An employee placed on garden leave remains subject to applicable employment obligations even when they are no longer actively working.
For example, a sales manager who resigns to join another company may be instructed not to contact existing customers or access internal sales records during the remaining notice period.
The employer would generally continue paying the employee according to the applicable employment terms while arranging for another staff member to take over their responsibilities.
However, the employer’s authority to impose such an arrangement depends on the employment contract, applicable law, and the circumstances.
Why Do Employers Use Garden Leave?
Employers may consider garden leave to:
- Protect confidential company information and sensitive business records.
- Manage customer relationships during an employee’s departure.
- Reduce potential conflicts of interest.
- Arrange a structured handover of responsibilities.
- Restrict access to internal systems when continued access is unnecessary.
- Maintain business continuity during staff transitions.
Garden leave should serve a legitimate business purpose rather than being used automatically whenever an employee resigns.
2. How Does garden leave Work During an Employee's Notice Period?
Garden leave generally operates within an existing notice period.
The employee remains employed, but the employer may direct them to stay away from the workplace, stop performing certain duties, or remain available for reasonable handover requests.
The arrangement should clearly identify the employee’s remaining employment period, remuneration, responsibilities, and any restrictions.
Garden Leave During Employee Resignation
When an employee submits a resignation, their employment contract may require them to serve a notice period before leaving the company.
If the contract permits garden leave, the employer may consider releasing the employee from daily responsibilities while maintaining the employment relationship.
For example, an employee serving a two-month resignation notice might be placed on garden leave for part or all of that period, depending on the contractual terms and applicable circumstances.
The employer should confirm the arrangement in writing to avoid confusion about the employee’s last working day and official employment end date.
Garden Leave During Employer-Initiated Termination
Garden leave may also be considered when an employer gives an employee notice of termination.
However, employers must distinguish garden leave from disciplinary suspension, immediate dismissal, or termination with payment in lieu of notice.
Placing an employee on garden leave does not remove the employer’s responsibility to comply with applicable termination requirements.
Where a termination involves misconduct, redundancy, disputed employment rights, or other sensitive circumstances, employers should obtain appropriate professional advice before deciding how to proceed.
How Long Can Garden Leave Last?
There is no separate, universally applicable statutory garden leave duration established under the Employment Act 1955.
The duration generally depends on the contractual notice period, any enforceable garden leave terms, and the arrangements agreed between the parties.
Employers should avoid assuming they can extend an employee’s employment or impose additional restrictions beyond the applicable contractual and legal framework.
3. Is garden leave Legal Under Malaysian Employment Law?
Garden leave is not expressly defined as an independent statutory entitlement under Malaysia’s Employment Act 1955.
This does not mean every garden leave arrangement is prohibited.
Instead, employers must consider whether the arrangement is supported by the employment contract, agreed with the employee, and consistent with applicable employment law.
Understanding broader Malaysian employment laws can help SMEs recognise why notice periods, wages, employee rights, and contractual terms require careful attention.
Does the Employment Act 1955 Specifically Recognise Garden Leave?
The Employment Act 1955 addresses various employment matters, including contractual notice and termination-related obligations, but it does not expressly establish a general garden leave entitlement.
Employers should therefore avoid treating garden leave as an automatic statutory right.
A garden leave arrangement must be assessed according to the applicable contract and legal circumstances.
Employers should also recognise that different employment arrangements or jurisdictions within Malaysia may involve additional legal considerations.
Can Employers Require Garden Leave Without a Contractual Clause?
An employer should not assume that paying an employee during a notice period automatically gives the company unrestricted authority to impose garden leave.
Where the employment contract does not contain an express garden leave clause, the employer should review its contractual rights and consider obtaining the employee’s agreement.
Depending on the circumstances, an attempt to impose substantial changes to employment duties or working arrangements without proper authority may create a contractual dispute.
Written agreement and professional advice may be appropriate where the position is unclear.
What Legal Risks Should Employers Consider?
Potential concerns include:
- Disputes over whether the employer can require garden leave.
- Unclear salary or contractual benefit arrangements.
- Restrictions that exceed what the contract or applicable law permits.
- Disagreements about the employment termination date.
- Inconsistent instructions regarding employee duties.
- Claims arising from improper contractual changes or termination procedures.
Employers should document their decisions and avoid assuming that a garden leave clause guarantees enforceability in every situation.
4. Are Employees Entitled to Salary and Benefits During garden leave?
Because garden leave generally takes place while employment continues, employers should expect to maintain the employee’s applicable salary and contractual entitlements.
However, the treatment of individual benefits, allowances, commissions, and other payments depends on the employment terms and relevant legal requirements.
Salary Payments and Contractual Benefits
An employee on garden leave generally continues receiving their normal contractual salary during the applicable period.
Employers should not automatically treat garden leave as unpaid leave simply because the employee is not performing daily duties.
Other benefits requiring review may include:
- Medical and health insurance coverage.
- Contractual allowances.
- Bonuses and commissions.
- Annual leave accrual and existing leave balances.
- Other benefits provided under the employment contract or company policies.
For example, a fixed contractual allowance may require different treatment from an expense reimbursement that is payable only when an employee incurs qualifying work-related expenses.
Employers should review the relevant terms rather than assuming every payment continues or stops automatically.
EPF, SOCSO and EIS Contributions
When an employee continues receiving remuneration during garden leave, employers must assess the applicable statutory contribution requirements.
These may include Employees Provident Fund (EPF), Social Security Organisation (SOCSO), and Employment Insurance System (EIS) contributions.
The treatment depends on the relevant statutory rules, employee eligibility, and the nature of the payments involved.
Employers should not discontinue statutory contributions solely because the employee has stopped attending the workplace.
Payroll and Leave Record Responsibilities
Accurate payroll administration is particularly important when an employee is approaching their final employment date.
Employers should verify:
- Salary payable throughout the notice period.
- Applicable statutory deductions and contributions.
- Contractual allowances and other payments.
- Outstanding annual leave balances.
- Any authorised deductions or adjustments.
- The final employment date and related payroll records.
Maintaining accurate documentation helps employers explain how the employee’s final remuneration was calculated if questions arise later.
5. What Should an Employment Contract Include About garden leave?
An appropriately drafted garden leave clause can help clarify the circumstances in which an employer may direct an employee not to perform their usual duties during a notice period.
However, including such a clause does not automatically make every proposed restriction enforceable.
Contractual provisions must still be considered in light of applicable Malaysian law.
Garden Leave Clauses and Notice Period Terms
Employers may consider addressing the following matters in their employment contracts:
- Circumstances in which garden leave may apply.
- Whether the arrangement can cover part or all of a notice period.
- Employee salary and contractual benefits.
- Duties the employee may still be required to perform.
- Communication and handover responsibilities.
- Restrictions on workplace and system access.
- The employee’s official employment termination date.
Clear terms can reduce uncertainty for both parties.
For SMEs, reviewing employment contract templates before employees resign may be more practical than attempting to resolve unclear provisions during a disputed departure.
Employee Duties, Confidentiality and Workplace Access
Garden leave clauses may address an employee’s responsibilities concerning company information, business property, and ongoing contractual obligations.
For example, an employee may be instructed to return company equipment, refrain from using confidential customer records, and remain contactable for reasonable handover matters.
Any restriction on other employment, business activities, or post-employment conduct should be assessed carefully.
In particular, employers should not assume that broad non-compete restrictions are enforceable under Malaysian law merely because they appear in an employment contract.
Why Clear Written Terms and Documentation Matter
Even when an employment contract contains a garden leave clause, the employer should communicate the actual arrangement in writing.
A garden leave notice may identify:
- The effective date of garden leave.
- The employee’s employment end date.
- Salary and applicable benefit arrangements.
- Permitted or restricted work activities.
- Handover requirements and contact persons.
- Company property return procedures.
- Relevant confidentiality obligations.
These records provide a clearer reference for payroll processing, HR administration, and employee communication.
6. What Can and Cannot Employees Do During garden leave?
Employees on garden leave generally remain bound by their continuing contractual obligations until their employment ends.
However, the specific activities employers can restrict depend on the applicable contract and legal circumstances.
Can Employees Start Working for Another Employer?
An employee should not assume that being excused from daily duties means their existing employment has already ended.
If the employment contract contains applicable restrictions on secondary employment, conflicts of interest, or working for competitors during employment, those provisions may need to be considered.
However, employers should not assume that every prohibition on working elsewhere is automatically enforceable.
The distinction between restrictions during an existing employment relationship and post-employment restraints is especially important under Malaysian law.
Where employees intend to begin another job before the official termination date, the parties should review the contract and clarify their respective obligations.
Can Employers Restrict Access to Company Information?
Employers may have legitimate reasons to manage an employee’s access to business systems during garden leave.
Depending on their authority and the circumstances, practical measures may include:
- Removing unnecessary access to confidential company files.
- Reassigning customer accounts to other employees.
- Updating access permissions for internal platforms.
- Securing company laptops and business documents.
- Redirecting work-related enquiries to an authorised employee.
These measures should be proportionate to business needs and consistent with applicable contractual and legal requirements.
Access restrictions should also be coordinated with the employee’s remaining handover responsibilities.
Employee Availability, Handover and Confidentiality Obligations
Being placed on garden leave does not necessarily release an employee from all employment responsibilities.
Depending on the agreed terms, an employee may still need to assist with handovers, respond to authorised enquiries, or return company property.
For example, an outgoing HR executive may need to explain the status of outstanding payroll documentation to a designated replacement.
Employers should communicate such expectations clearly rather than leaving employees uncertain about what they are required to do.
7. How Is garden leave Different From Other Employment Arrangements?
Garden leave is sometimes confused with annual leave, ordinary notice periods, payment in lieu of notice, and employee suspension.
Although these arrangements may all involve an employee being away from the workplace, their purposes and employment implications differ.
Arrangement | Employment Status | General Purpose | Payment Considerations |
Garden leave | Employment continues during the applicable period | Excuse an employee from some or all duties during notice | Contractual salary and applicable benefits generally continue |
Annual leave | Employment continues | Allow an employee to take leave entitlement | Paid annual leave is governed by applicable terms and law |
Ordinary notice period | Employment continues until termination takes effect | Provide advance notice of employment ending | Salary generally continues while employment and work obligations remain |
Payment in lieu of notice | Employment ends on the applicable termination date rather than through service of the substituted notice period | Compensate for notice not served | Payment depends on contractual and statutory requirements |
Employee suspension | Depends on the circumstances and arrangement | Temporarily remove an employee from duties, potentially during an investigation | Payment rules depend on the reason, applicable law, and contractual terms |
Garden Leave vs Annual Leave
Garden leave is an arrangement associated with an employee’s notice period, while annual leave is an employment leave entitlement.
Employers should not automatically deduct garden leave days from an employee’s annual leave balance.
Any overlap must be assessed according to applicable employment terms and legal requirements.
Garden Leave vs Ordinary Notice Period
During an ordinary notice period, employees typically continue performing their regular duties until employment ends.
During garden leave, the employee remains employed but may be excused from some or all duties.
In both situations, the employment termination date must be clearly identified.
Garden Leave vs Payment in Lieu of Notice
The main distinction concerns whether employment continues during the relevant notice period.
With garden leave, the employment relationship generally remains active until the notice period ends.
With payment in lieu of notice, the employee does not serve the substituted portion of the notice period, and employment ends on the applicable termination date.
Employers should not confuse notice-related payments with other termination entitlements, such as severance pay in Malaysia, which may arise in different circumstances and under different requirements.
Garden Leave vs Employee Suspension
Garden leave is generally used to manage employee departures, while suspension may involve disciplinary concerns or an investigation.
Employers should not use the terms interchangeably.
Where an employee is suspended in connection with alleged misconduct, different legal and procedural requirements may apply.
8. What Are the Benefits and Risks of garden leave for Employers?
Garden leave can provide employers with additional control over an employee’s transition out of the business.
However, the arrangement also involves financial costs, contractual considerations, and operational limitations.
Protecting Confidential Information and Business Relationships
One reason employers consider garden leave is to manage access to sensitive commercial information when an employee is preparing to leave.
This may be relevant for employees who handle:
- Customer databases and business contacts.
- Confidential pricing arrangements.
- Strategic business plans.
- Proprietary documents and internal procedures.
- Sensitive financial or employee information.
Nevertheless, garden leave alone does not guarantee that confidential information will remain protected.
Employers should maintain appropriate information security procedures and communicate continuing confidentiality responsibilities.
Supporting Employee Handover and Business Continuity
Garden leave may help an employer separate an outgoing employee from day-to-day business activities while allowing time for other employees to assume their responsibilities.
For example, a business owner may reassign customer communications to another sales representative before the outgoing employee’s official termination date.
However, an abrupt departure from active duties can also create operational difficulties if the employee has not completed a proper handover.
Employers should plan access restrictions and knowledge transfer together.
Salary Costs, Operational Challenges and Potential Disputes
Garden leave may not be appropriate for every SME.
Potential disadvantages include continued salary expenditure, reduced available manpower, disruption to unfinished projects, and uncertainty over employee responsibilities.
An employer may also face a dispute if the arrangement conflicts with contractual terms or involves unclear restrictions.
For smaller businesses operating with limited manpower, these costs and risks should be assessed before deciding whether garden leave is necessary.
9. How Can Malaysian SMEs Implement garden leave Properly?
A structured approach can help SMEs manage garden leave more consistently while keeping employee communications, payroll records, and business operations organised.
The following steps are practical HR considerations rather than a guarantee that a particular arrangement will be legally enforceable.
Review Employment Contracts and Applicable Requirements
Before implementing garden leave, review the employee’s employment contract, notice period, relevant company policies, and applicable employment requirements.
Identify whether the proposed arrangement is supported by contractual terms or whether the employee’s agreement or professional advice may be needed.
Confirm the Arrangement and Employee Responsibilities in Writing
Once the appropriate basis for the arrangement has been established, communicate the terms clearly.
The written communication should explain the relevant dates, remuneration arrangements, remaining responsibilities, and any restrictions.
Employers should keep a copy of the communication and record any agreement reached.
Plan Handover, System Access and Payroll Administration
Coordinate with the relevant departments to manage the employee’s departure.
Practical actions may include:
- Assigning responsibility for outstanding tasks and customer accounts.
- Confirming which company systems the employee still needs to access.
- Arranging the return of company documents and equipment.
- Recording salary, benefits, leave balances, and applicable statutory contributions.
- Preparing the final payroll and employee exit documentation.
These actions should be carried out according to the employee’s contractual obligations and applicable company procedures.
Maintain Complete Employee Exit Documentation
Employers should maintain organised records relating to the employee’s resignation or termination, garden leave instructions, handover process, payroll treatment, and official termination date.
For example, an employer may become concerned if a former employee subsequently raises questions with the Labour Department (JTK) and the company cannot readily locate the relevant documents.
Complete records do not guarantee that an employment dispute will be avoided or resolved in the employer’s favour.
However, they can help employers establish what instructions were given, which payments were made, and how the employee exit process was handled.
For Malaysian SMEs without a dedicated HR department, consistent documentation and clearly assigned responsibilities can make employee departures easier to administer.
Conclusion: Managing garden leave With Clear HR Procedures
Garden leave can be a useful arrangement for Malaysian employers who need to manage employee departures while protecting confidential information, maintaining business continuity, and coordinating employee handovers.
However, its implementation requires careful consideration of employment contracts, notice periods, salary obligations, and applicable Malaysian employment laws.
For SMEs, the priority should be establishing clear employment terms, communicating expectations in writing, and maintaining accurate payroll and employee exit records.
Employers should also assess whether garden leave is appropriate for the individual circumstances rather than treating it as a standard requirement whenever an employee resigns.
Businesses that need assistance reviewing employment documentation, organising HR procedures, or managing employee transitions can explore Mustre’s Human Resources Services.
Mustre provides practical HR management, payroll administration, and consultation support to help Malaysian employers manage staff-related responsibilities more systematically.
For more guidance on workplace management and employment practices, explore Mustre’s Employment Trends and Best Practices articles.
Frequently Asked Questions About garden leave in Malaysia
Can an Employee Refuse Garden Leave?
Whether an employee can refuse garden leave depends on the employment contract, any agreement between the parties, and applicable legal requirements.
If the contract contains an applicable garden leave clause, the employee may have contractual obligations to follow the arrangement.
However, employers should not assume every clause or instruction is automatically enforceable.
Where the parties disagree, professional advice may be appropriate.
Can an Employee Request Garden Leave?
Yes.
An employee may request garden leave during their resignation notice period, but the employer is not automatically required to approve it.
Any arrangement should be considered against the employment contract, operational requirements, and applicable legal obligations.
Employers should document the agreed terms, including salary, benefits, duties, and the official employment end date.
Can an Employee Take Annual Leave During Garden Leave?
Garden leave and annual leave are different arrangements.
Being placed on garden leave does not automatically mean an employee has used their annual leave entitlement.
Whether annual leave can be taken during the same period depends on applicable employment law, contractual terms, and the arrangements made between the employer and employee.
Employers should maintain accurate leave records and avoid automatically deducting annual leave balances.
What Happens When the Garden Leave Period Ends?
Garden leave usually ends when the employee’s contractual notice period expires and employment officially terminates.
Employers should complete outstanding payroll matters, address any remaining contractual payments or benefits, confirm the return of company property, and finalise employee exit documentation.
Any confidentiality or other obligations intended to continue after employment ends must be considered separately under applicable contractual terms and Malaysian law.
