Changes to non-compete clauses. What you need to know

The Department for Business and Trade has published a working policy paper seeking views on different options to reform non-compete clauses in employment contracts. It forms part of the government’s aim to reduce barriers for businesses, entrepreneurs and investors, who are important to boosting economic growth.

There is consideration being given to support businesses and reduce the negative effects of non-compete clauses, which can restrict employee movement, limit knowledge sharing and undermine incentives for innovation.

This could help drive change by supporting start-ups and growing businesses to access talent, improving competition and providing millions of UK workers with greater freedom to switch jobs, start new companies and apply their skills to the greatest effect.

Non-compete clauses are a form of restrictive covenant. They are clauses that are inserted into a contract of employment to protect an employer’s business, but they’re also found in other types of contracts.

Such clauses are used by employers to restrict the activities of an employee after the employment has ended and it can affect their ability to work and earn money, use of restrictive covenants by employers is managed by the doctrine of ‘restraint of trade’, applied by the courts when considering whether to enforce them. They will only allow this if the clause is reasonable.

There could be an introduction of statutory limits on the length of non-compete clauses which could be shorter or longer than three months or based upon company size could see this duration changed. Potentially a ban on all non-compete clauses or even if below salary threshold.

We are not likely to know the outcome until the end of the first quarter of 2026 once the consultation period closes in February 2026. 121 HR Solutions keep their HR Business Partnership clients abreast of all such legislative updates and review the necessary contractual documentation, contact us on 0800 9995 121 to find out how we can support your business.

Changes to non-compete clauses. What you need to know

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