An employer-side guide for HR, payroll, and founders.
Garden leave is usually discussed as a legal question: can we keep a departing employee away from clients, systems and competitors? Once that decision is made, though, it becomes a payroll and HR-operations problem. The employee is still on payroll, still earning leave, still building gratuity, and the final settlement deadline is counting toward a date that is easy to miscalculate.
This guide covers the payroll side only. It sets out what garden leave is in UAE practice, what continues during it, how to work out the dates, and a checklist to run the process cleanly.
Informational only — not legal advice. This article is point-in-time (last updated October 2026) and summarises the general framework, not a legal opinion. The DIFC and ADGM operate separate frameworks. Verify with MOHRE (mohre.gov.ae) or a qualified adviser before acting.
What garden leave means in the UAE
Garden leave is not a term defined in Federal Decree-Law No. 33 of 2021. It is a practice: during the notice period, the employer asks the employee not to attend work, and not to work for anyone else, while the contract continues.
Two things follow from that.
- It sits inside the notice period. The notice period is still set by the contract and, under Article 43, must be at least 30 days and no more than 90 days. Garden leave changes where the employee spends that time, not how long it is.
- Employment has not ended. The employee is still your employee, on your payroll, until the notice period runs out.
Because the law does not define it, put the instruction in writing. A short letter stating the start date, the end date, and what the employee may and may not do is what payroll and HR will work from.
Pay: nothing stops
The most common payroll mistake is treating garden leave as the end of employment. It is not. The employee is paid the wages and benefits due under the contract for the whole notice period, and the monthly run continues as normal.
For payroll, that means:
- Keep the employee on the monthly payroll and on the WPS file until the contract end date. Stopping pay when they stop attending is a late-salary risk.
- Pay fixed components in full — basic salary and fixed allowances as set in the contract.
- Check variable pay against the contract. Commission, bonus and performance pay may depend on the employee actually working. Look at what the contract and policy say, agree the treatment in writing, and apply it consistently.
- Keep deductions lawful. Normal deductions continue to apply, within the limits that govern them.
Leave balances keep accruing
Because employment continues, so does the accrual of annual leave. Garden leave does not freeze the balance.
Your payroll cut-off should therefore:
- Accrue annual leave up to the contract end date, not the date the employee stopped attending.
- Confirm whether the employee will take any leave during the garden-leave period. Taking leave inside it is a question of how you record it, not a separate entitlement.
- Calculate any untaken balance for the final settlement. The annual leave encashment guide covers how the day value is worked out.
A leave balance that was correct on the day garden leave began will be wrong at the end of it if nobody updates it.
Gratuity runs to the last day of employment
Gratuity is tied to length of service, and service continues until the contract ends. Garden-leave days count.
So the gratuity figure in the final settlement should be calculated to the last day of the notice period, not to the start of garden leave. If the notice period is 60 days and garden leave covers all of it, those two months are part of the service used in the calculation. The gratuity calculator guide walks through the method.
The 14-day settlement clock
Final dues should be settled within 14 days of the end of the contract. For garden leave, the point that matters is where that clock starts.
It starts on the contract end date — the last day of the notice period. It does not start:
- on the day notice was served,
- on the day garden leave began, or
- on the day the employee last came into the office.
The final settlement covers gratuity, any leave encashment, and any outstanding wages, and each of those should be calculated to the same end date.
A worked example, with dates
The figures and dates below are illustrative, to show the mechanics.
Scenario. An employee resigns with a 60-day contractual notice period. On day 1 of notice, the employer asks them to go on garden leave for the whole notice period, in writing.
- Day 1 to day 60: employment continues. The employee is paid their full monthly pay and stays on the WPS file. They are not attending work.
- Leave balance: annual leave keeps accruing across all 60 days. At the end date, any untaken balance is calculated for encashment.
- Gratuity: service is counted to day 60.
- Contract end date: day 60.
- Settlement deadline: day 60 plus 14 days.
Compare this with ending employment on day 1 and paying the notice wages in lieu. The contract would end on day 1, leave and gratuity would stop accruing then, and the 14-day clock would start then. The two routes give different numbers and different deadlines, which is why you should decide between them deliberately.
Common payroll mistakes
- Stopping pay or WPS submission when the employee stops attending.
- Freezing the leave balance on the day garden leave begins.
- Cutting gratuity off at the start of garden leave instead of the contract end date.
- Starting the 14-day clock too early, from the day garden leave began.
- No written instruction, so HR, payroll and the employee each hold a different date.
- Mixing up garden leave and payment in lieu, which have different effects on every date above.
The HR checklist
- Confirm the contractual notice period (30–90 days) and the notice start and end dates.
- Issue a written garden-leave instruction with the start date, end date, and the employee's obligations.
- Keep the employee on payroll and the WPS file to the contract end date.
- Agree the treatment of variable pay in writing.
- Keep accruing annual leave to the contract end date and record any leave taken.
- Run gratuity to the last day of employment.
- Calendar the settlement deadline — contract end date plus 14 days.
- Settle all dues within 14 days: gratuity, leave encashment and outstanding wages.
The bottom line
Garden leave is a legal and commercial decision, but its consequences land in payroll. The employee stays paid, leave and gratuity keep accruing, and the 14-day settlement clock starts at the contract end date — not when the employee stops coming in. Put the instruction in writing, key every calculation off the contract end date, and the final pay run will match what you intended.
For the surrounding rules, see RadixHR's notice period guide, the termination of employment guide, and the guide to notice served during annual leave.
Sources & references
This guide is based on the following official UAE government sources, current at the time of writing (verify the latest versions directly, as the law and MOHRE guidance are updated periodically):
- Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships (as amended) and its Executive Regulations — including Article 43 (termination with notice). Published on the UAE Legislation portal.
- MOHRE (mohre.gov.ae) — guidance on notice periods, final settlement and the Wage Protection System for the mainland private sector.
- DIFC and ADGM — separate employment frameworks with their own notice and termination rules. Confirm the applicable regime with the relevant authority.
Keep garden leave from becoming a payroll error
RadixHR keeps the employee on payroll and the WPS file, accrues leave and gratuity to the contract end date, and flags the 14-day settlement deadline from the contract records — so a garden-leave exit is calculated right the first time.
This article is for general information only and does not constitute legal advice, and is point-in-time (last updated October 2026). Notice, garden leave and settlement rules depend on the employment contract and are set under Federal Decree-Law No. 33 of 2021 and its Executive Regulations, which are subject to change; the DIFC and ADGM operate separate frameworks. Verify current requirements with MOHRE or a qualified adviser before acting.
