What do we know about the proposed changes to non-compete clauses?

Earlier in October (9th) the Prime Minister announced confirmation that the government intends to implement legislation to address what he has referred to as “restrictive practices such as non-compete clauses”.  The aim of this is to remove barriers to hiring by start-ups, and address the concern that such clauses cause with this.

The announcement comes as a response to a letter sent to the government by the founders of tech-startups. The letter argued that non-compete clauses and elongated notice periods along with garden leave enforcement, meant the undermining of innovation that drives economic growth.

The Government is expected to set out its position on non-compete clauses early in 2027.

Current legislation on non-compete clauses

Non-compete clauses are a type of post-termination restraint that can prevent a departing employee from engaging with a competitor or activities that are deemed competitive over a defined period of time.

Currently there are no statutory limits on the duration of a non-compete clause and there is no salary threshold or requirement to pay employees mandatory compensation during the duration of the non-compete clause, post-termination.

What are the possible proposed changes?

Whilst speculative at the current moment in time there are several possibilities that could be considered an outcome.

An outright ban on non-compete clauses

• This would mean that the government would introduce legislation that would render non-compete clauses unenforceable.  

Threshold on salary

• This would require a ban on non-competes for workers earning below a certain amount.

Statutory cap on duration

• This would mean a cap on the maximum duration of non-competes.

Mandatory compensation upon parting

• This would require the employer to pay a percentage of the departing employees’ compensation during the period of non-competition.

Restrictions based on size of employer

• It is possible that the cap on duration of non-compete clauses will be based on the size of the employer, based on views sought in the The November 2025 working paper.

How should employers be preparing?

Whilst these changes are still hypothetical, until finalised and put into legislation, there are things that employers can be preparing for.

• Review notice periods and garden leave.

• Consider incentives such as repayment provisions.

• Review IP, confidentiality as well as other restraints.

• Utilise the maximum protection afforded by other covenants.

Talk to a Croner expert

Get advice on how to apply restrictive covenants correctly and fairly. Talk to a Croner Employment Law advisor today on 0800 470 9999.