Government to act on ‘stifling’ employment clauses that hold back start-ups » SMEInsider

Government to act on ‘stifling’ employment clauses that hold back start-ups

Business Secretary Sajid Javid is set to investigate employment rules that could be “stifling British entrepreneurship” and hindering people from setting up a business after leaving a job.

Mr Javid is calling for evidence around ‘non-compete clauses’, which can be written into employment contracts to stop workers from starting up in competition with a former employer or working for a direct competitor after they leave a job.


Home of business brains

Aimed at backing small businesses and entrepreneurs, the move will protect the brightest UK talent and is part of the government’s plans to make Britain the “best place in Europe to start up a new business”.

Under the investigation, ministers are asking for feedback form employers and individuals on whether these clauses prevent innovation and entrepreneurialism and hinder employment.

Mr Javid said: “Home to some of the most innovative companies in Europe, Britain is already ahead of the curve in many ways when it comes to driving forward new ideas.

“But I am clear that I want to see more enterprising start-ups and greater productivity in a free and fair marketplace, by making sure we take action to break down any barriers that are curbing innovation and entrepreneurship.”


Locked in, blocked out

Non-compete clauses are enforceable by law only if they are reasonable and safeguard a legitimate interest. But it has been suggested that they can stifle commercial progress by preventing start-ups from recruiting top staff.

Some contracts lock former employees in for up to nine months after they leave a job.

Emma Jones, founder of Enterprise Nation, added: “The UK continues to record over half a million start-ups being formed each year, with many people starting a business by holding onto the day job and building the business at nights and weekends.

“Entrepreneurial individuals need to be able to ease out of employment and into self-employment so a move to look into how employment contracts reflect this and the modern economy is warmly welcomed.”