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article  /  15th Oct 2026

Non-Compete Clauses: What could the proposed crackdown mean for employers?impact hr ident

SECTION GUIDE

What is the government proposing on non-compete clauses?

Prime Minister Andy Burnham announced on 9 October 2026 that the government intends to introduce legislation to prevent non-compete clauses from acting as a barrier to recruitment for promising start-ups and growing businesses. The announcement was made during the Innovation Nation Summit, where the Prime Minister argued that these restrictions can limit innovation and prevent skilled workers from moving freely between organisations.

Non-compete clauses are contractual restrictions that can prevent an employee from joining a competing business, setting up their own competing organisation or working in a similar role for a specified period after leaving their employer. They are typically included in employment contracts to protect legitimate business interests, such as confidential information, intellectual property and commercially sensitive knowledge.

However, the government is concerned that these restrictions can go further than necessary, limiting employees’ career opportunities and making it harder for businesses to recruit people with the skills and experience they need. This can be particularly challenging for start-ups and growing businesses that rely on attracting experienced employees to develop new products, services and ideas.

The proposed legislation forms part of a wider effort to support economic growth by making it easier for talent to move between organisations. The government has also indicated that it intends to explore options for addressing the wider use of restrictive practices that can prevent workers from changing jobs.

A government announcement about proposed legislation is not the same as a change in the law. Until the details and commencement date are confirmed, employers should avoid assuming that non-compete clauses have already been banned or restricted in a particular way.

Non-compete clauses

What is a Non-Compete Clause?

A non-compete clause is a contractual term designed to restrict an employee from working for a competing business or setting up a competing business for a specified period after leaving their current employer.

Employers may include these clauses in employment contracts to help protect legitimate business interests, particularly where employees have access to commercially sensitive information, valuable client relationships or confidential business plans.

For example, a business might include a non-compete clause in the contract of a senior employee who has access to its pricing strategy, future business plans or key client information.

However, non-compete clauses are just one type of restrictive covenant. Other provisions can help employers protect their business interests in different ways:

  • Non-solicitation clauses: Restricting former employees from approaching or attempting to win certain clients or recruit colleagues after leaving.
  • Non-dealing clauses: Restricting former employees from doing business with specified clients, even if those clients approach them first.
  • Confidentiality clauses: Protecting sensitive business information from being disclosed or misused.

These distinctions are important because each type of restriction serves a different purpose. Depending on the circumstances, a combination of appropriately drafted contractual provisions and practical information security measures may provide more suitable protection than relying on a non-compete clause alone.

For employers, the key is understanding what genuinely needs protecting and ensuring any restrictions are appropriate, proportionate and legally enforceable.

WHAT'S CHANGING

What could the proposed changes mean for employers?

The potential changes could affect how businesses recruit, retain employees and protect their commercial interests.

  • 1. Reviewing existing employment contracts

    Employers may need to reconsider the wording of their employment contracts and whether their current restrictions are proportionate to the risks associated with each role.

    A clause that has been included in every employee’s contract as standard may not be the most appropriate approach. Restrictions should reflect the legitimate business interests the employer needs to protect.

    What employers can do: Review existing contracts, identify where non-compete clauses are used and consider whether alternative protections could achieve the same purpose.

  • 2. Strengthening other contractual protections

    If non-compete clauses become more restricted, employers may need to place greater emphasis on other ways to protect their business interests.

    Depending on the circumstances, non-solicitation, non-dealing and confidentiality clauses may help protect client relationships, sensitive information and commercially valuable knowledge.

    However, these provisions are not interchangeable, and they will not necessarily prevent every risk associated with an employee joining a competitor.

    What employers can do: Review the restrictive covenants in existing contracts and consider whether they offer appropriate protection. Employers should also ensure confidentiality agreements, data protection policies and access controls are in place to help safeguard sensitive business information.

  • 3. Understanding the risks associated with different roles

    Not every employee presents the same level of commercial risk when they leave an organisation. For example, a senior employee with access to strategic plans and confidential pricing information may present different risks from an employee whose role does not involve access to sensitive information.

    A more tailored approach can help employers identify which business interests need protecting, rather than applying the same restrictions across the workforce.

    What employers can do: Consider which roles have access to commercially sensitive information, key client relationships or intellectual property. Use this assessment to inform contractual protections and ensure they are appropriate for the individual role.

    This recommendation follows the general principle that restrictions should be justified by the employer’s legitimate business interests. It is not a new statutory requirement confirmed by the government’s announcement.

  • 4. Rethinking employee retention

    Restrictive covenants are only one part of protecting a business. If employees are leaving to join competitors, employers may also benefit from looking at the reasons behind those decisions.

    Career development, progression opportunities, workplace culture, pay and employee engagement can influence whether people choose to stay with an organisation.

    Although contractual protections may help manage certain risks, creating an environment where employees want to build their career can also support long-term retention.

    What employers can do: Review employee feedback, development opportunities and retention strategies. Understanding why people leave can help businesses address potential issues and build stronger working relationships.

What are the advantages and disadvantages of non-compete clauses

Non-compete clauses can offer employers a degree of protection when employees leave the business, particularly where their role involves access to commercially sensitive information, business strategies or valuable client relationships.

However, these restrictions can also create challenges for both employers and employees. Understanding the potential benefits and limitations can help businesses decide whether a non-compete clause is appropriate for a particular role.

  • Potential benefits for employers:

    • Protecting commercial interests: Restrictions may help protect legitimate business interests where an employee has access to sensitive commercial information.
    • Reducing certain competitive risks: A suitably drafted restriction may help limit the risk of a former employee immediately using their knowledge of the business in a competing role.
    • Supporting wider contractual protections: Non-compete clauses can form part of a broader approach to protecting confidential information and business relationships.

  • Potential disadvantages:

    • Limiting recruitment opportunities: Restrictions can make it harder for employees to move between organisations and for competing businesses to recruit experienced professionals.
    • Creating uncertainty: Disputes over the wording or enforceability of restrictive covenants can lead to additional legal costs and management time.
    • Restricting career progression: Employees may feel limited in their ability to pursue opportunities that align with their skills and experience.

BE PREPARED

What should employers do now?

Although the government has announced its intention to legislate on non-compete clauses, employers should check the latest official updates before making assumptions about the precise scope and implementation of the proposed changes.

In the meantime, there are practical steps businesses can take to prepare:

  • Audit existing contracts: Identify where non-compete clauses and other restrictive covenants are used across the workforce.
  • Review legitimate business interests: Consider what the business needs to protect, including confidential information, client relationships and intellectual property.
  • Check alternative protections: Assess whether other contractual provisions and internal procedures offer appropriate safeguards.
  • Seek legal advice where needed: Obtain advice before making significant changes to employment contracts or relying on restrictive covenants to prevent a former employee from joining a competitor.
  • Monitor developments: Keep up to date with government announcements and any legislation that follows, so contractual arrangements can be reviewed when the details become clearer.

How can impact HR help?

Changes to employment law can leave employers questioning whether their existing contracts and HR practices are still appropriate. Taking the time to review your arrangements now can help you identify potential gaps and understand where further advice may be needed.

If you would like to review your current employment contracts or discuss how potential changes could affect your business, get in touch with our team to find out how we can help.

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Your Questions Answered

Everything you need to know about Non-Compete Clauses

  • Are non-compete clauses enforceable in the UK?Reveal

    Non-compete clauses are not automatically enforceable simply because they appear in an employment contract. In England and Wales, an employer generally needs to demonstrate that the restriction protects a legitimate business interest and goes no further than reasonably necessary to protect it. Enforceability depends on the wording of the clause and the circumstances of the individual case.

  • Are non-compete clauses being banned in the UK?Reveal

    The government has announced proposals to legislate on non-compete clauses, with the aim of making it easier for start-ups and growing businesses to recruit skilled workers. However, employers should check the latest official announcements and legislation before assuming that a ban or specific restriction is in force. The precise scope and implementation of any changes are important.

  • How long can a non-compete clause last?Reveal

    There is no single maximum duration that makes every non-compete clause enforceable in England and Wales. The appropriate period depends on factors such as the employee’s role, the business interests being protected and whether the restriction is reasonable in the circumstances. A longer restriction is not automatically enforceable just because it is written into a contract.

  • What is the difference between a non-compete and a non-solicitation clause?Reveal

    A non-compete clause generally restricts a former employee from working for a competitor or starting a competing business for a specified period. A non-solicitation clause focuses on preventing the former employee from actively approaching specified clients, customers or colleagues. The restrictions serve different purposes, and the precise wording determines how they operate.

  • Can an employee join a competitor after leaving their job?Reveal

    An employee may be able to join a competing business, but the answer depends on their employment contract and any applicable restrictions. Employers may have legitimate reasons to protect confidential information, client relationships and other business interests, but restrictions must be assessed on their own terms. Employees and employers should seek legal advice if they are unsure about their obligations or rights.

  • What should employers do if non-compete clauses become more restricted?Reveal

    Employers can prepare by reviewing existing employment contracts, identifying the business interests they need to protect and considering whether other contractual provisions or practical safeguards are appropriate. This may include reviewing confidentiality clauses, non-solicitation provisions, data access controls and employee offboarding procedures. Employers should also monitor developments and obtain legal advice before making significant contractual changes.

Where to find out more A collection of hand-picked useful resources for non-compete clauses from impact HR and beyond

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