Garden leave refers to a period when an employee still receives a paycheck but stays away from the workplace, without access to workplace systems or customers. In Hungary, it is a normal part of ordinary termination by the employer, allowing employees time to find a new job or rest between employments. For foreign workers, it still counts as employment, so work permits remain valid throughout.
In this article, you can read about the following topics:
What is garden leave?
The term garden leave or gardening leave refers to a time at the end of an employment relationship when the employee is still officially employed and on payroll but they are not working anymore: they are excluded from work related systems and isolated from customers. The mental image is that they are already out the door but not yet on the street, so they can only do gardening.
The term is most widespread in the U.K., Australia, and New Zealand, although it is also known in the U.S. It is applied most often in the financial sector to employees who have access to trade secrets, confidential data, or client information, such as senior executives with strategic knowledge, sales leaders with strong client connections, or in technical roles that involve trade secrets. A garden leave may also be applied to group exits (when multiple employees leave at the same time).
Sometimes garden leave can have negative connotations, being considered a suspension, without access to the workplace and its infrastructure (while benefits and salaries remain in place). In other cases, garden leave is considered an alternative to a non-compete cause, if the employer wants to withhold the employee from entering employment at the competition. (Of course, this must be regulated in the labor contract in advance and then duly compensated for.)
Garden leave in Hungary
In Hungary, garden leave is part of ordinary termination by the employer. Unless the employee is sent away still during their trial period, there must be a notice period of at least 30 days (to be specified in the labor contract), and the employer can require the employee to work at most during half of the notice period. During the rest of the notice period, the employee will be on garden leave: they remain on payroll but they cannot be expected to work.
Mind you, these days ordinary termination is often replaced by “mutual agreement”, where the employment relationship ends with immediate effect, and the employee receives a lump sum compensation for their missed notice period and garden leave. This is sometimes referred to as payment in lieu of notice (PILON), and it offers a clean break to both parties. Of course, the employee is not obligated to accept such an offer, so employers sometimes sweeten the deal with an exit bonus.
Garden leave considerations for work permit holders
While your foreign employee is on garden leave, the employment relationship remains intact, and as such, their work permit remains valid.
In line with this, terminating employment immediately via mutual agreement might be disadvantageous to foreign employees, because then their work permit would also expire immediately. Hungary has pretty strict immigration rules, and most work permits allow very little time for finding new employment upon the expiry of the work permit.
Work permit types less affected by this include:
- The EU Blue Card, which allows holders 3 months to find a new job during the first 2 years of validity, and 6 months after that.
- Family unification + work permit: in this case, the employee can fall back on their residence permit based on family unification, and will be able to apply for another work permit once they find another job.
As a responsible business owner, it is best if you consider the residency status of your employee before deciding how to terminate the employment relationship.
HR compliance and work permit solutions in one place
Helpers offers assistance not only with work permit applications but also with HR compliance and payroll. Our services cover all the essential aspects of operating a business in Hungary, and our team has more than 20 years of experience supporting international clients.
We provide both advisory and administrative support, ensuring that you can make the most of every situation. Leave administration to the experts, and focus on making your business a success.
FREQUENTLY ASKED QUESTIONS
Yes, there is, although it is rarely referred to as such. Garden leave, when an employee is still enrolled at a business but is not working anymore, is part of ordinary termination by the employer, as work can be required during at most half of the notice period.
Garden leave is mandatory in Hungary when the employer ends the employment via ordinary termination. Then at least half of the notice period has to be garden leave when the employee still receives salary but they are not working (of course, the entire notice period can be turned into garden leave if the employer does not want the employee to spend any more time at work, accessing sensitive infrastructure).
At the same time, the employer can offer payment in lieu of notice, in which case, termination will happen by mutual agreement, and garden leave will not be mandatory anymore.
Employers usually offer payment in lieu of notice when they prefer severing ties with the employee as soon as possible. This might happen for various reasons: the employee might be considered a security risk, or the opposite, they are leaving on amicable terms and the employer wants to allow the employee to start their new job as soon as possible.
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