12th January 2021

Could non-compete and exclusivity clauses be scrapped from UK employment contracts?


As a recruiter, there’s nothing more frustrating than finding the perfect person for a role… only to discover they’ve recently worked for a direct competitor. But contractual restrictions could soon become a thing of the past – if new reforms are passed in 2021.

To support COVID-19 recovery plans, the government is pushing for rules around exclusivity and non-compete clauses to be relaxed, in the hope it will help thousands of UK employees improve their financial prospects after a difficult year. And where there’s greater job prospects for people, there is greater earning potential for recruitment agencies.

Two consultations currently in progress

The economic impact of COVID-19 is forcing the UK government to address current working structures, finding new ways to support innovation and boost employment prospects. Two important consultations are currently open, which could relax the rules for employees – and help recruiters to find new opportunities in the process.

The first is a motion to stop employers building non-compete clauses into their contracts as a standard term of employment.

There are two options up for discussion: making post-termination non-compete clauses unenforceable altogether, or putting some form of limit on the length of non-compete clauses. If the consultation falls in favour of option two, there will also be a motion to provide financial compensation to employees who cannot work due to contractual obligations.

The second consultation currently in progress concerns exclusivity clauses in employment contracts. At the moment, many firms ban their workforce from undertaking any other form of paid work, unless they are on zero hours contracts.

The government wants to relax these rules to include anyone whose income is below the Lower Earnings Limit (£120 per week), to help professionals that are struggling financially to seek alternative paid work around their core hours.

Keeping pace with changing regulations

Relaxing the rules around competition and exclusivity can only be a good thing for recruitment agencies. It will take away the red tape that so often stops talented people from securing the right roles!

However, even if employment law is relaxed, recruiters will still need to tread carefully. For example, you must have a clear record of your candidates’ current employment terms and earnings, to see how the new regulations affect their capacity to work.

You will also need to work closely with clients to update their current contracts, educating them on the benefits of introducing a wider scope for employment. It may enable them to carry out more headhunting work, for instance, or onboard people in part-time and/or temporary roles who are currently bringing in less than the Lower Earnings Limit.

More updates to a moving landscape

It’s also worth bearing in mind that potential changes to exclusivity and non-compete clauses are just two of many recruitment reforms coming in 2021. As the Freelance Informer notes, Brexit and the updating of IR35 regulations in April this year will create “recruitment hell” for many companies, and other legal reforms will add further complexity.

As a resource provider, the best way to remain accurate and efficient in the face of such change is to log all your candidate and client data on a digital recruitment CRM system.

The more detail you can record on each person or organisation, and the more accessible you can make it to your whole team, the easier it will be to work quickly in a constantly moving climate. The process will become even more rapid if you can integrate your CRM system with online compliance tools, which speed up the admin and onboarding processes.

More importantly, you can use the rich information available through recruitment CRM to create new employment opportunities in 2021 – showcasing strong candidates who have previously been trapped in their current role by tight contractual obligations. There’s no escaping the fact that COVID-19 will continue to impact employment levels over the next 12 months, and the recruitment agencies that weather this storm best will proactively pair open-minded businesses with the strongest available talent.

Capitalising on the green shoots of recovery

2021 is going to be a restorative year for the recruitment industry, and the UK government has clearly recognised its role in the rebuilding journey. The consultation around exclusivity and non-compete clauses closes in late February; if it is successful, we could see an increasing in employment opportunities in the Spring.

To fully capitalise on the green shoots of recovery, however, your agency will need the right recruitment tech stack to understand where new opportunities lie, and act quickly. Better data, faster processes and agency-wide integration will prove key to success in the year ahead.

If you’re concerned about your infrastructure going into 2021, make sure you speak to ETZ about how our back office, payroll and CRM software can support business growth.

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