How to manage employees with ‘side hustles’

How should employees with other job interests be managed?

More and more people are taking on “side hustles” in addition to their main job. But while supporting side hustles can be good for engagement, there are a number of legal considerations for employers, write Adam Penman and Nickie Pickernell.

Increasing numbers of full-time employees are running a side hustle, whether that takes the form of a second job, freelancing or their own business.

This will be unsurprising to some, given the press coverage of industry trends among millennials, but research shows that side hustles are becoming more popular throughout all working age groups.

A survey conducted by CV-Library shows that 60% of those who take on some form of outside work feel they have to work more because they don’t earn enough from their primary employment, while a third of those with side hustles would consider giving it up if their full-time employer increased their salary. So what issues does this create for employers?

Staff turnover

An important commercial consideration when deciding on a company’s policy regarding side hustles are the needs and priorities of their employees.

It’s important to strike a balance between the risk of an employee leaving their primary employment to either work full-time at their secondary job or pursue their business venture full-time, and the risk, if outside commercial activities are restricted, that the employee may leave to seek more flexible employment elsewhere.

Studies have shown that employers consider employees with side hustles to be happier and more productive in their main role as a result. With that in mind, the middle ground of permission requirements and full disclosure surrounding outside work may be the best course of action for employers, though this is of course dependent on the nature of the business.

Despite these benefits, there are further risks that employers need to be aware of, and steps they can take to minimise any negative impact.

Working Time Regulations

The Working Time Regulations govern the maximum average number of hours worked per week of an employee, ensuring that employees receive enough time to rest (including rest breaks, annual leave and time off between shifts).

When employees take on multiple employment obligations, such as a second job, the onus is still on the employer to take all reasonable steps to protect the health and safety of employees by ensuring that this limit is complied with.

Failure to do so is a criminal offence which is punishable with a potentially unlimited fine. Employers should encourage the disclosure of additional work, and consider implementing a policy under which employees require permission from the employer to take on outside work so that steps can be taken to monitor compliance.

Employers may request that employees opt out of the Working Time Regulations in writing (usually by signing a form provided by the employer) in any event, but particularly where the employer allows or is aware of any additional work.

Performance

An employee’s activities outside of work could start to impact their performance at work. Managers could use usual channels such as the company’s capability procedure, but arguably there are more proactive ways to deal with this.

Employers should adopt an open dialogue concerning outside obligations, in particular whether any chances could be made in relation to their primary employment to negate a need for additional work (such as salary adjustment or moving to a flexible working schedule).

In any event, companies may consider including an express term in the contract which prohibits any additional employment or business activities which affect the employee’s ability to devote their full attention to their work during work hours.

Competition issues

If an employee is using the same skill set for which they are employed in their side hustle, the issue of competition arises.

Whether that is by employment with a competitor or through their own business working in competition with their primary employer, any activities that conflict with their primary employer’s interests will be prohibited and somewhat protected by an implied term of fidelity in their employment contract.

However, employers should implement a non-competition policy and a corresponding clause in the employment contract which specifies the restricted activities of the employee.

To this end, employers should also review their confidentiality policy to ensure this restricts the use of confidential information in the employee’s external activities.

Best practice

Employers should ensure that they have a robust policy regarding the outside interests of employees, that is not so onerous as to impact their enjoyment of a private life, but which will protect the business’ legitimate interests.

If outside interests are permitted under the employment contract, this should include an obligation to disclose any secondary employment or business ventures as well as a restriction on working for or conducting business as a competitor. Without such an obligation, employees are not required to disclose outside work to their employer, which places the risk of infringement of the Working Time Regulations squarely in the hands of the employer.

It’s helpful to encourage not only disclosure, but an open dialogue with employees surrounding their outside work in order to ensure employees are not overworked or unsatisfied with their primary employment. This will help preempt any disruption to the business as well as have a positive impact on morale and employee engagement.

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About Adam Penman and Nickie Pickernell

Adam Penman and Nickie Pickernell are employment lawyers at McGuireWoods
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