The unseen risks of employees running side businesses

As living costs continue to climb and flexible working arrangements become more widespread, increasing numbers of employees are supplementing their income through second jobs or personal ventures alongside their primary role. These activities range from freelance work and online trading to gig economy roles and social media content creation, reflecting a workforce that is more enterprising than ever.

Although many employers appreciate the financial pressures behind this shift, additional work outside core employment can create a number of legal, operational and reputational challenges if left unmanaged.

Some employment contracts expressly restrict outside work. Even where they do not, employees remain subject to an implied obligation to act in their employer’s best interests. This includes avoiding competition with the business and refraining from using confidential information for personal benefit.

To safeguard their interests, employers should review employment contracts to ensure they include:

appropriate exclusivity provisions or a requirement to obtain written permission before undertaking additional work;
clear definitions of what constitutes a conflict of interest or competing activity; and
confidentiality obligations that apply beyond normal working hours.

Employers are required to take reasonable steps to ensure compliance, even when excess hours are worked for another organisation. Practical measures include asking new recruits to declare other employment, maintaining accurate records of opt-outs and working patterns, and regularly reviewing arrangements where workloads or external commitments change.

Secondary employment often becomes an issue when it begins to affect performance. Patterns such as frequent lateness, reduced engagement or missed deadlines may be linked to evening or weekend work elsewhere.

Before taking disciplinary action, managers should investigate the root cause and consider whether expectations around rest and boundaries are clear, whether flexibility or support could resolve the problem, and whether there is sufficient evidence that external work is genuinely affecting performance. Any response should follow a fair and consistent process to reduce the risk of unfair dismissal claims.

Should you require any advice in this area, please contact 121 HR Solutions on 0800 9995 121.

The unseen risks of employees running side businesses

121 HR Solutions Ltd