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Staff side hustles | 10 employer questions answered

Written by David Eastwood and Angela Black on 4 April 2022

Second jobs or ‘side hustles’ have exploded in popularity in recent years. In fact, according to a recent study, two thirds (68%) of working Brits have one, with 31% having started theirs in the first year of the pandemic.

From podcasting to selling handmade products, these ventures are adding an average of £4,932 to people’s annual income. And with the UK in the midst of a cost-of-living crisis, it’s easy to see the appeal. While some have simply monetised their existing passions and found a way to profit from hobbies discovered during lockdown, others now need a secondary source of income to offset mounting energy bills, record food and fuel prices, and increased National Insurance contributions.

But while employers may understand the rationale, there’s often a sense of nervousness when staff pick up a side gig. Could there be a conflict of interest? How do you prevent these secondary projects from encroaching on the day job? Is there a threat of leaking confidential information or abusing company resources? Could it complicate working relationships?

WorkNest’s Employment Law and HR experts, David Eastwood and Angela Black, answer 10 questions businesses might have about side hustles to help you understand your rights as an employer, protect your business interests and, hopefully, put your mind at ease.

1. First, are employees obligated to disclose their side hustles?

Employees are not obliged to inform their employer of any side hustle, unless their contract of employment requires such disclosure. Even then, there’s an argument that compelling them to do so may be unreasonable in certain situations.

For example, you might legitimately need to know whether a senior employee with a high-pressure, demanding job has other commitments that might distract them from their role, but could you say the same of a junior, part-time worker?

In the main, employers are not responsible for, or expected to regulate, what employees do outside of their employment. What they do in their own time is largely their own business, so long as it doesn’t interfere with your legitimate interests.

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2. Can we ban side hustles?

Employers can sometimes reasonably demand that employees don’t adopt side hustles, but circumstances in which such a move would be deemed reasonable are rare. Instead of an outright ban, employers should seek to ensure that outside interests do not conflict, and this is where your policies and contracts come in.  

These should make it clear that it is the employee’s responsibility to ensure that their personal business or financial interests don’t conflict with their responsibilities to the company or impair their ability to carry them out.

Useful clauses to include in employees’ contracts of employment could include ‘Confidentiality’, ‘Intellectual Property’, ‘Copyright’ and ‘Data Protection’ clauses.

Note that under Section 27A of the Employment Rights Act 1996, employers cannot prevent workers on a zero-hours contract from accepting work under another contract, or prohibit them from doing so without the employer’s consent. Any such provision within the contract will be unenforceable.

3. Can we retrospectively add clauses to contracts to restrict side hustles, if they have only just become an issue?

If you wish to amend an employee’s terms and conditions to introduce a new restriction, you are required to seek their agreement in the first instance.

If you are unable to get them to agree, it might be possible to enforce the change via a “fire and rehire” process – essentially terminating the employee’s current contract and reemploying them on new terms – but the circumstances in which this would be reasonable and fair would be very limited.

Whilst fire and rehire practices are currently legitimate in the right circumstances, there is growing hostility towards them, and this could attract negative attention. In addition, because they involve a dismissal, there’s the added risk of unfair dismissal claims.

4. How can we prevent conflicts of interest?

Again, the contract is key.

Whilst employees are bound by an implied term not to compete with their employer, it is sensible to state within the employee’s contract that they must not engage in any activity that conflicts or competes with the employer’s business unless this is expressly authorised by their line manager, director or HR.

5. How can we stop employees from stealing ideas?

Any intellectual property (IP) that is created by the employee in pursuit of their employment by you ultimately belongs to you, the employer. Nevertheless, it doesn’t do any harm to expressly state that in the contract and to make provision for them assigning any rights to you where necessary.

If they come up with ideas entirely independent of their job with you, that is their property.

If the employee seeks to exploit your brand or other IP for their own benefit, they will expose themselves to serious disciplinary action and other legal recourse, such as for an account of profits, if they have actually gained financially by stealing or exploiting your IP.

6. How can we prevent employees misusing company resources, such as software and other equipment?

It’s worth expressly stipulating that company property of any description may not be used for any purpose other than legitimate company business.

Having a sound IT policy which states whether or not an employee can use hardware (such as laptops, phones and tablets) for their own personal use is another measure to ensure clarity. In this regard, you might want to distinguish between purely personal use – such as using company equipment to phone a family member or pay a household bill – and use in connection with their other business interests.

7. How do we stop their work from suffering?

It’s reasonable to expect employees to devote their full time and attention to their job during working hours, and working on a side hustle in work time can be addressed as misconduct.

The lines can become blurred at times – sending a few emails on a lunch break for example – so some common sense has to be exercised around how you deal with such issues.

If there is a noticeable deterioration in the employee’s performance and you have reasonable grounds to suspect that their side hustle is to blame, investigate. You may choose to discuss this informally with the employee in the first instance; however, formal action through your capability or disciplinary procedures might be appropriate if the problem persists.

Keep in mind that enforcing a ban via disciplinary action would usually be unreasonable and therefore unfair. Although if the employee’s performance at work with you is affected by their other interests, this would be something that could be taken into account in any performance management process that you might need to follow.

8. What about the impact on wellbeing?

Although side hustles can push some to brilliance, they could push others to breaking point. Employers should carry out regular one-to-one meetings with their employees to assess how they are coping and ensure that their second job isn’t affecting their main employment and mental health. It is advisable to carry out a risk assessment to identify any risks and what reasonable steps are needed to eradicate these risks.

Concern for mental health may be all the more prevalent if the employee has taken on the side hustle as a way of making ends meet. If you feel they are overstretching themselves in order to make additional income, you may feel obligated to step in and help them financially.

Ultimately however, provided you are paying employees in line with National Minimum Wage requirements, there is no obligation to increase an employee’s pay. However, discussion should be held to support employees where reasonable and practicable.

9. What if they leave to set up a competing business – how can we protect our interests?

Employees’ contracts will often contain restrictive covenants which restrict the employee from doing certain things, such as poaching staff and clients, for a limited period of time following termination. This may include a non-compete clause, which prevents the employee from competing with the business once they have left.

Whilst these can be difficult to enforce in practice, provided that you can show that the restrictive covenant is only in place in order to protect your legitimate commercial interests, and that it only extends far enough to reasonably protect those interests, a court can enforce these via injunctions and other remedies.

Additionally, if you’re worried about what they might get up to during their notice period, you could evoke any garden leave clause within their contract to withdraw the employee’s duties and prevent them from entering the premises.

10. So, should we embrace side hustles or seek to stop them?

For employers, it may be smarter to support side hustles rather than seek to prohibit them. While fears are understandable, provided you have policies and procedures in place to prevent conflicts of interest and monitor the employee’s performance, there’s potential benefits for both businesses and staff.

Worrying about money affects people’s health, relationships, and psychological wellbeing and side hustles can make employees feel more financially secure, give them renewed energy and purpose, and improve their mental health. Exploring other ventures can also help employees gain valuable new skills and sharpen existing ones. All of this can only be good for businesses.

In fact, some companies are even launching schemes to support employees’ endeavours outside of work in a bid to encourage loyalty and innovation. Havas Media Group, who has launched a side hustle training programme, said: “It makes sense; staff are more likely to stay in an environment that champions them as individuals, encourages creativity and respects their autonomy outside of the workplace. Not only that, the company they work for is actively helping them develop skills they wouldn’t learn otherwise.”

The good news for managers is that most side hustlers don’t usually want to quit their day jobs – in fact, research shows that 70% of employees with a side hustle actually want the security of a full-time job too. Perhaps, therefore, employers should embrace their entrepreneurial staff – but within certain boundaries.

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Need advice on side hustles? Get specialist support from WorkNest

From making sure your contracts and policies protect your interests to managing potential misconduct, WorkNest’s Employment Law and HR experts are here to help you ensure side hustles don’t hinder your day-to-day business operations, as well as minimise the risk of employee disputes.

For advice and support, call 0345 226 8393 or request your free consultation using the button below.

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