Garden leave (Freistellung) is the practice of releasing an employee from the obligation to work during the notice period while continuing to pay full salary. In Germany, this is a routine settlement component that can equal or exceed the headline severance in economic value — but the technical details matter substantially, particularly the question of whether the leave is „with” or „without” offset against vacation entitlement, and whether other income earned during the leave is subtracted from the salary obligation.
Two types: revocable and irrevocable
Under German law, garden leave comes in two legally distinct forms:
Revocable release (widerrufliche Freistellung)
The employer reserves the right to recall the employee to work during the notice period. The employee must remain available. Practical consequences:
- The employee cannot freely accept other employment (because they might be recalled).
- Vacation accruals continue.
- The leave does not count as „taken vacation.”
Revocable release is the weaker form for the employee. Avoid agreeing to it without explicit reason.
Irrevocable release (unwiderrufliche Freistellung)
The employer waives the right to recall. The employee is free to:
- Take other employment immediately.
- Travel, relocate, or pursue other activities.
This is the standard form in settlement agreements and the one to insist on.
The key question: with or without Anrechnung (offset)
The Anrechnung of other income (§ 615 BGB)
Under § 615 BGB, where the employer is in default of acceptance (Annahmeverzug — which includes garden leave), the employee must allow the employer to offset other income earned during the period. Three categories of „other income”:
- Salary from new employment — offsetable.
- Income from freelance work — offsetable.
- Unemployment benefits (Arbeitslosengeld) — generally NOT offsetable against the contractual salary obligation (the BA pursues the employer for reimbursement separately).
To prevent offset, the standard wording in settlement agreements is „unter Verzicht auf Anrechnung anderweitigen Verdienstes” — the employer waives the § 615 BGB offset right. This is a routine negotiation point and we secure it in most settlements.
When garden leave makes sense for the employer
Employers offer garden leave when:
- The employee has access to sensitive information (clients, strategy, code) and the employer wants distance during the notice period.
- The relationship has broken down and continued physical presence would be operationally awkward.
- Non-compete or non-solicitation enforcement is anticipated, and the garden leave forms part of the no-contact period.
- The settlement is being structured to avoid Sperrzeit triggers at the Bundesagentur für Arbeit.
When garden leave makes sense for the employee
Garden leave is typically a net positive for the employee:
- Continued salary at the contractual rate.
- Pension and social-security contributions continue.
- The employment relationship continues for Blue Card / residence-permit purposes — the § 18b AufenthG 3-month job-search window doesn’t start until the formal end date.
- Time to find new employment without unemployment-benefit gaps or Sperrzeit risk.
Garden leave duration
The maximum garden-leave period is limited by the notice period. Typical scenarios:
- Statutory notice (4 weeks): garden leave of 4 weeks.
- Contractual notice (3 months): garden leave of 3 months.
- Long contractual notice (6–12 months for senior employees): garden leave of 6–12 months at full salary — economically substantial.
For employees with long notice periods, the garden leave alone can equal the headline severance in economic terms. A 6-month garden leave at €8,000 gross/month = €48,000 in extra economic value beyond the cash severance.
Strategic interactions with severance and other components
Garden leave + severance
The headline severance is typically structured as a one-time payment AFTER the garden-leave end date — this maximises the Fünftelregelung tax benefit (the severance qualifies as compensation for loss of employment if paid as a single lump sum).
Garden leave + bonus pro-rata
Garden leave during a bonus year typically entitles the employee to the pro-rata bonus for the garden-leave period — based on average past performance or contractual minimum. Negotiable.
Garden leave + vacation
As above: insist on „ohne Anrechnung” so unused vacation is paid out separately.
Garden leave + non-compete
Where a post-employment non-compete applies, the garden leave is sometimes included in the non-compete period (consuming the Karenzentschädigung obligation early) or sometimes runs separately. The wording matters.
Garden leave + benefits in kind
Company car for private use, subsidised health insurance, pension contributions, share/options vesting — all of these typically continue during garden leave unless the agreement specifies otherwise. Pin this down explicitly.
Worked example
A senior engineering manager at a Frankfurt bank, 10 years tenure, €120,000 base + €40,000 typical bonus, 6-month notice period.
The bank offers an Aufhebungsvertrag: €60,000 cash severance, immediate termination, no garden leave. We restructure:
- 6-month garden leave at full base + pro-rata bonus = €60,000 + €20,000 = €80,000.
- „Ohne Anrechnung” of vacation — 18 unused days paid out separately = €8,300.
- „Unter Verzicht auf Anrechnung anderweitigen Verdienstes” — employee free to accept new job during garden leave without offset.
- Cash severance paid lump sum at end of garden leave = €72,000 (down from €60,000 because the employer’s overall budget reallocates — but the Fünftelregelung maximises the lump-sum benefit).
- Grade-1 reference letter.
Total economic value: €80,000 (garden leave) + €8,300 (vacation) + €72,000 (severance) = €160,300, vs. the bank’s initial offer of €60,000. Plus the employee starts new role at month 3 of garden leave — €30,000 additional bridge income with no offset.
Frequently asked questions
Can I take another job during garden leave?
Yes, with two conditions: (i) the garden leave must be irrevocable (unwiderrufliche Freistellung); (ii) any non-compete or non-solicitation clauses must permit the new employment. Where the agreement waives § 615 BGB offset, the new salary doesn’t reduce your garden-leave pay.
Can I travel during garden leave?
Yes. You are released from the duty to work and to be available. Travel is unrestricted unless the agreement specifies otherwise (rare).
Does my health insurance continue during garden leave?
Yes — your employment relationship continues until the formal end date. Statutory health insurance and pension contributions continue as normal.
What about company car / phone / laptop?
Whatever the agreement says. Typical practice: company car and phone returned at start of garden leave; laptop sometimes retained for residual transition tasks. Always pin this down in the agreement.
What if the employer revokes the garden leave?
Only possible if it was revocable (widerrufliche Freistellung). Irrevocable release cannot be unilaterally revoked. If the employer attempts to revoke irrevocable release and demands return to work, the employee can refuse without loss of pay rights.
Does garden leave count as „taken” vacation for the BUrlG calculation?
Only if „unter Anrechnung.” If „ohne Anrechnung,” the vacation balance survives and is paid out at exit. We insist on the latter.