Is the government going to ban non-compete clauses?

Undeterred by the huge amount of work required to prepare for and implement the Employment Rights Bill, the government has set itself another goal: reforming non-compete clauses in contracts of employment. These are the restrictions that prevent employees from competing with their employer for a defined period after their employment ends.

Quite why it thinks now is a really good time to look at, what is quite a niche issue, is up for debate. The government says its about boosting the economy. It believes that non-compete clauses make it more difficult for businesses to recruit talented people, for entrepreneurs to set up on their own, and that they deter investors. The businesses it has in mind in this context are start-ups, scale-ups and other small businesses.

It also points to the “behavioural effect” non-compete clauses have on staff. Workers may not understand the law and may believe a clause is binding on them - even if it isn't. 

Hasn't this been considered before? 

Yes. In 2014, the coalition government commissioned a report which recommended that non-compete clauses in contracts of employment should be banned on the basis that they act as a barrier to workers starting up their own businesses.

Then, in 2016 it initiated a consultation to identify  'whether there are reasons for believing that non-compete clauses … are stifling innovation, particularly for start up businesses'. That review was abandoned, only for the issue to pop up again in 2020 when the government launched a consultation, after which it announced that it would impose a three month limit on the length of non-compete clauses. However, it didn't take any action to implement this. 

What options are the government considering?

These are set out in a policy paper which was published yesterday (26 November 2025). 

1. Imposing a statutory limit on the length of non-compete clauses

The previous government favoured limiting the maximum length of all non-compete clauses to three months. This government is worried that if it adopted this approach, three months would become the ‘industry standard’ and employers and workers would believe that any clause of this length would be reasonable and enforceable. Of course, this argument can be made if they imposed a longer or shorter period. 

In fact, non-compete clauses are in restraint of trade and can only be enforced if they are reasonable in terms of their scope, duration and are necessary to protect legitimate business interests. 

The government is considering both a longer maximum period (of between six and 12 months) and a shorter one (of between one and three months) - although it recognises that businesses are unlikely to try and enforce really short non-compete clauses. 

2. Linking this to the size of the company

The government is considering setting different limits according to the size of the organisation. One option is for smaller employers with less than 250 staff to have six month restrictions, and larger ones three months. 

Another option is for companies with more than 50 employees to have three month restrictions, and six month restrictions for those with 50 or fewer employees.

3. Banning all non-compete clauses 

Banning in this context means you wouldn't be able to enforce any non-compete clause of any length or scope.  

The government believes this will ‘remove barriers to recuitment and encourage the diffusion of skills and ideas between companies and regions, which can in turn impact competition and innovation’. 

However, it acknowledges there are some drawbacks. In particular, that employers may ramp up their use of other restrictive covenants, confidentiality clauses and intellectual property protections and remove benefits from employees who give notice and join a competitor.

It's not that common to see an employment contract which just contains a non-compete clause. Most employers include client non-solicitation and non-dealing clauses as well as employee non-poaching clauses. Enforcing these is subject to the same principles of reasonableness and that will restrict how much employers can ‘ramp up’ protections.

It's also very common for employees to forgo certain contractual entitlements (such as bonuses) if they leave within a certain amout of time. 

Despite this, the government has said that if it adopts this option it may restrict non-dealing and other covenants.

4. Banning non-compete clauses below a salary threshold

This option would remove non-compete clauses for lower paid workers. However, the government hasn't identified who is a low paid worker or what the salary threshold should be. It suggests that one option is to mirror the additional rate tax threshold of £125,140 and only those paying this should have restrictions on their ability to compete. As an aside, I am not sure many people would consider those earning £125,000 are low paid! Median gross annual earnings for full-time employees were £39,039 in April 2025. 

According to HMRC data, there are around 1.13 million people in the UK paying the additional rate of income tax (45%) on earnings above £125,140 in the 2024/25 tax year. 

5. Combining a ban below a salary threshold and a statutory three month limit

This would ban non-compete clauses for workers earning below the salary threshold and limit how long an enforceable non-compete clause could last for those above it. The government suggests that three months is appropriate for the latter.  

How many workers are likely to be impacted? 

That will depend on which option the government goes for.

Around five million workers have non-compete clauses in their contracts of employment. That's around 26% of the workforce. These types of clauses are not limited to high earners: around 10% of people working in teaching and retail have them, as do 20% working in the hospitality sector. 

The government also points to data which suggests that 71% of workers have non-compete clauses lasting longer than three months.

Deadline to respond 

If you would like to have your say, the consultation is open until 18 February 2026. 

There are 15 questions to answer - some are on the specific options, others focus on whether making changes will improve investment and entrepreneurship, impact investment in training and ask about the costs of bringing and defending claims. 

Our newsletters

We publish monthly employment and education newsletters. If you'd like to be added to the mailing list, please let me know.