The government estimates 1.8m workers across the UK could top-up their income with additional work and employers could tap into a larger pool of part-time staff © Ricahr Drury/Getty Images

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Almost 2m low-paid workers will be given greater freedom to take new jobs under government plans that will also encourage “a wave of new start-ups” by allowing people to move more easily to rival businesses.

The government wants to ban exclusivity clauses in employment contracts, which prevent the low-paid from taking on extra part-time and flexible jobs with other employers. 

In a consultation launched on Friday, the Department for Business, Energy and Industrial Strategy (Beis) said the ban could apply to workers with a weekly income below £120 a week.

The government estimates that if exclusivity clauses were forbidden, 1.8m low-paid workers across the UK could top up their income with additional work, while employers could tap into a larger pool of part-time staff.

The decision to restrict the use of non-compete clauses by employers is likely to be more contentious. Larger companies rely on such contractual obligations to stop their talent from leaving.

The government has confirmed plans to remove barriers that prevent workers in technology, legal and other sectors from starting up or joining competing businesses, but will consult on whether to ban non-compete clauses fully.

Paul Goulding QC, a leading employment barrister, said he was “surprised to see the idea [of banning non-compete clauses] revived now since the government abandoned a similar proposal a couple of years ago on the basis that the common law has developed in this area for over a century and is generally acknowledged to work well”. 

The government said that the move, which was first reported by the FT, will give talented individuals the freedom to apply their skills in another role, “unleashing a wave of new start-ups across the country”.

Other proposals involve employers who wish to use non-compete clauses compensating workers, so they receive a pay-off if they are restricted from joining or starting a similar business. Officials hope this will discourage the unnecessary and widespread use of such employment restrictions.

“A more flexible approach to non-compete clauses would be great for the start-up ecosystem,” said Dominic Hallas, executive director for the Coalition for a Digital Economy, a start-up business group. “You might have some moaning from incumbents but it will be great for British tech and the British economy in the long run.” 

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EU countries such as Germany and France already restrict exclusivity clauses so as to stimulate innovation. In California, where non-compete clauses are not enforceable, the free movement of workers has been given as a reason for the rapid growth of the tech sector.

Business secretary Alok Sharma said: “We want to ensure every worker has the freedom and flexibility to work in the way they want, where they want — whether that’s topping up their pay packet by taking on additional work, or being able to start their own business with the skills they’ve gained throughout their career.”

TUC general secretary Frances O’Grady said that “these changes are no substitute for a proper levelling-up of rights at work”, adding: “Rather than tinkering around the edges, the government needs to come forward with the employment bill it promised.”

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