When an employee resigns: notice, garden leave and the handover

In a five-person business, a resignation lands differently. There is no HR department to absorb it, the person leaving probably holds knowledge nobody else has, and the owner is usually processing the news personally at the same time as having to handle it professionally.

The professional half is mostly a sequence, and knowing the sequence removes most of the stress from the first 48 hours.

First: do not accept it in the room

Resignations given in temper are common and legally messy. If someone resigns in the middle of an argument, the safe response is to say you have heard them, that you will not treat it as final today, and that you will speak tomorrow. Then follow up in writing.

There is no legal cooling-off period, but a tribunal will look at whether a reasonable employer would have taken words said in the heat of the moment at face value. Accepting an angry resignation instantly, and then refusing to let the person retract it, is one of the ways a resignation becomes a dismissal claim.

Once it is genuinely meant, ask for it in writing, and confirm back in writing: the date you received it, the notice period, and the last working day. Nearly every later dispute about notice traces back to nobody writing down the date.

How much notice you are actually owed

An employee's statutory minimum notice is one week, once they have a month's continuous service, however long they have worked for you. That is it. Twenty years of service does not extend it.

The contract can require more, and usually should — a month is normal for most roles, longer for senior or hard-to-replace ones. But the clause only helps if it exists and is proportionate; a six-month notice period on a junior role is the sort of thing that gets treated as unenforceable when tested.

Your obligation runs the other way and is longer: one week's notice per complete year of service after the first month, capped at twelve weeks, or the contractual period if it is greater.

You cannot make someone work their notice

If an employee walks out without working notice, you have a claim for breach of contract, not a right to force attendance. In practice that claim is rarely worth bringing, because you have to prove actual financial loss — typically the extra cost of covering the work — and pursuing an ex-employee for a four-figure sum is expensive and corrosive.

You also cannot simply dock their final pay in retaliation. Deductions from wages need express contractual authority and a genuine loss to deduct against. Withholding wages for hours already worked, without a clause, is an unlawful deduction, and it is one of the easiest claims for an employee to win.

The moment a resignation lands, you stop managing a person and start managing a handover. The two require very different conversations.

Garden leave, and the clause it depends on

Garden leave means the employee stays employed and paid throughout notice but does not come to work. It is the right answer where someone is going to a competitor, has access to sensitive commercial information, or is simply too unsettled to be useful.

It needs an express clause in the contract. Without one, requiring someone to stay away can itself be a breach — particularly in roles where skills or reputation decay without practice. Where the clause exists, remember what garden leave does not suspend: the employee remains employed, so pay and benefits continue, holiday keeps accruing, and their duties of confidentiality and fidelity still apply. You can require holiday to be taken during the period, but you must give notice of at least twice the length of the leave you are directing.

Payment in lieu of notice is the alternative: you end the employment immediately and pay the notice as a lump sum. That also needs a contractual clause to avoid being a breach of contract, and it is fully taxable. Since April 2018 all notice pay is treated as earnings and subject to income tax and National Insurance, so the old idea that a payment in lieu is somehow tax-advantaged is simply out of date.

If protecting clients is the real concern, the clause that matters is not the notice clause — it is covered in restrictive covenants: can you actually stop an ex-employee poaching your clients?.

Final pay, with the arithmetic

Accrued but untaken statutory holiday must be paid on termination. Over-taken holiday can only be recovered from final pay if the contract expressly says so.

Take an illustrative example. Someone on £38,000 a year, with the statutory 5.6 weeks — 28 days for a five-day week — on a holiday year running January to December, resigns and works a month's notice to a last day of 11 September. That is 253 days of the holiday year, so accrued entitlement is 28 × 253 ÷ 365 = 19.4 days. They have taken 12, leaving 7.4 days to pay. At a daily rate of £38,000 ÷ 260 working days = £146.15, the holiday element of final pay is roughly £1,083.

Add it to salary up to the last working day, deduct anything you are contractually entitled to deduct, and process it through payroll in the normal way.

The handover is the bit worth the time

Three or four weeks of notice is a window that closes permanently, and most small businesses waste it on awkwardness.

Ask for a written handover document rather than a conversation: live jobs and their status, client contacts and quirks, where files sit, recurring tasks and their timing, passwords and access to be transferred, and anything that only exists in their head. Set the deadline for a week before the last day, not the last day itself, so there is time to ask questions about it.

Do the exit conversation properly too, and do it near the end when candour is easiest — the practical version is in how to run an exit interview that actually tells you something. Then close the loop on access: email, cloud storage, accounting software, the till system, the van keys, the client portal. Offboarding gets forgotten in small firms far more often than onboarding does.

What to do in the first 48 hours

Confirm the resignation and the last working day in writing. Check the contract for notice, garden leave, payment in lieu and any covenants. Decide whether they work notice or not, and tell them plainly. Set the handover deadline. Work out the holiday position early rather than on the final payroll run. Tell the team yourself, before they hear it sideways. And be decent about the reference — the version that quietly costs everyone something is described in the two-line reference, and what everyone lost when it became standard.

Common questions

How much notice does an employee legally have to give me?

One week, once they have a month's continuous service, unless their contract says more. Length of service does not increase an employee's statutory notice the way it increases yours — a twenty-year employee still owes one week unless the contract improves on it. Your own obligation is different: one week per complete year of service after the first month, capped at twelve weeks, or the contractual period if longer. This asymmetry is exactly why a written contract earns its keep for any role you could not replace in a fortnight. A month is standard for most positions, and longer for senior or specialist roles, provided it is proportionate to the job.

Can I put someone on garden leave, or make them leave immediately?

Only if the contract gives you the right. Garden leave keeps the employee employed and paid but away from work, and without an express clause requiring that can itself be a breach of contract, particularly in roles where skills or client relationships decay without practice. Ending the employment immediately and paying notice as a lump sum also needs a payment in lieu of notice clause. During garden leave the employment continues, so pay and benefits run on, holiday keeps accruing, and duties of confidentiality still bind them. You can direct holiday to be taken during the period, giving notice of at least twice the length of the leave.

Can I deduct money from final pay if they leave without working notice?

Only where the contract expressly authorises it and you have a genuine loss to set against. Deducting from wages already earned, without a clause, is an unlawful deduction from wages and one of the simplest claims for an employee to win at tribunal. Leaving early is a breach of contract, so you have a claim for the financial loss it causes — usually the extra cost of covering the work — but proving and pursuing that against a former employee is rarely economic. The realistic protection is a properly drafted contract with a deductions clause, agreed at the start rather than argued about at the end.

Do they still build up holiday during their notice period?

Yes. Holiday accrues throughout notice whether they are working, on garden leave or off sick, and any accrued but untaken statutory holiday must be paid out on termination. Calculate it pro rata across the holiday year. On a 5.6-week entitlement, which is 28 days for a five-day week, someone leaving 253 days into the holiday year has accrued 28 × 253 ÷ 365 = 19.4 days; deduct what they have taken and pay the balance at their daily rate. Holiday they have over-taken can only be recovered from final pay if the contract expressly permits that deduction.