What is garden leave and when is it right for SMEs?

Garden leave is paid leave for an employee who is leaving your business to work for a competitor. But how do you know whether it’s appropriate, or affordable, for you to place an employee on garden leave?

The experts from Brighter Business, Opus Energy’s small business advice hub, have got the following advice. Read on to find out more.

 When is it appropriate for SMEs to offer garden leave?

If you think an employee (or a soon-to-be former employee) could carry sensitive or confidential information across to a competitor, then placing that individual on garden leave is an appropriate course of action.

It’s also a good way to distance an employee from your business to prevent sabotage or to avoid the poaching of other employees from your company by another.

It may make life slightly difficult for their successor without a formal handover process, but it’s a sensible way of protecting your business.

Cost consideration

Garden leave can be a difficult proposition for small businesses. The financial aspect will naturally be a concern, given that employees placed on leave still receive full pay even though their work will be spread across other people.

However, when considering garden leave you should think about the knowledge that the employee in question has and how valuable that is to your business – and how valuable it could be to a competitor.

If the employee is personally involved in a project which may give you a competitive edge, then gardening leave is a no-brainer. An employee who has been offered a role either at a direct competitor or in the same industry is a valuable asset to the competition, given that the employee will carry a vast knowledge bank with them.

The knowledge that they take away from your business needs to be replaced at some point, but limiting the damage is the primary concern. By removing an employee from the day-to-day, you limit their exposure to any confidential or sensitive information which could improve a competitor.

Non-compete clause

While it may be too late to implement this for the employee that’s leaving, it’s worth considering the insertion of non-compete clauses in employee contracts in the future.

These clauses stipulate that employees are not allowed to enter or establish a business which competes with their former company. These are not necessary in all professions, but in businesses where sensitive information could provide competitive advantage.

There are arguments against non-compete clauses; a government review has suggested that they are restrictive and stifle entrepreneurship by preventing experienced workers from starting their own business.

However, as a means of protecting your business against dangerous competition, it’s a good strategy and can help you to prepare for life without a valuable employee while giving you the confidence that they’re not out strengthening a competitor


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