The ban on most non‑compete clauses could transform talent retention, poaching risks and pay negotiations – especially in relationship‑driven sectors
The Albanese Government is moving ahead with sweeping reforms that would ban most non‑compete clauses and other post‑employment restraints for a large portion of the Australian workforce. For HR leaders, this is not a distant policy discussion – it is a fundamental shift in how organisations will attract, retain and protect talent over the next few years.
Under the proposal, non‑compete clauses and various post‑employment restrictions would be prohibited for workers earning under the “high‑income threshold”, the same benchmark used for unfair dismissal eligibility in the Fair Work Commission. That threshold is currently $183,100, and employers would also face new limits on no‑poach and other anti‑competitive arrangements.
According to Melini Pillay, principal at McCabes, these reforms are tightly tied to the government’s worker‑centric agenda. The Treasurer has argued that loosening restraints on movement will boost job mobility, lift wages and support productivity. Treasury estimates suggest the changes could increase GDP by around $5 billion and raise wages by 2–4%, on the assumption that workers who are free to move will secure better pay when changing jobs.
At the same time, the government sees non‑competes as a drag on the broader economy. In April 2024, the Treasurer described these practices as restrictive for both job mobility and economic productivity, signalling the government’s view that too many employees are effectively locked in.
Recent data from the Australian Bureau of Statistics underscores how far‑reaching these reforms may be. In a 2023 survey of 4,900 employers, about 21% reported relying on non‑compete clauses. The practice was most prevalent in financial and insurance services, followed closely by real estate. For HR leaders in those sectors, the proposed ban will feel particularly acute.
Pillay, however, warned that the current policy settings risk being a blunt instrument. The changes are proposed to commence in 2027, and she is hopeful there will be “better consideration” of how the ban interacts with the high‑income threshold before then. A key concern is that many roles, especially in real estate, sit below the threshold on base salary but earn substantial commissions. Those commission earnings are not counted in the high‑income threshold assessment, even when they push total remuneration well above the intended protection level.
In practical terms, that means high‑earning, commission‑driven employees could still fall within the ban on non‑competes simply because their base salary is lower. Pillay noted that these workers are arguably not the vulnerable group the government is aiming to protect, yet the law as currently framed would still strip away restraints for them. For relationship‑driven businesses, that is a serious exposure: an employee might see a modest percentage pay rise as a worthwhile trade for taking clients and growth opportunities to a competitor.
The risks are not just theoretical. Businesses that “properly rely” on non‑competes – for example to protect key client relationships, pipelines or confidential strategies – face the prospect of intensified poaching and coordinated moves. Without enforceable restraints, an employer might lose not only one high performer but also a cluster of colleagues and a book of clients in a single move. In industries where personal relationships drive value, that kind of shift can reshape revenue in months, not years.
Pillay also flagged a likely knock‑on effect for data and confidentiality risks. If non‑competes and related restraints are weakened or removed, there may be a corresponding increase in the misuse of confidential information and in data breaches. These issues are already “somewhat prevalent” in sectors like real estate, she noted, and employers may find themselves with fewer practical tools to deter misconduct if post‑employment restraints are off the table.
For HR leaders, the message is clear: preparation cannot wait until 2027. The first practical step is a thorough review of existing employment contracts, focusing on the drafting of post‑employment restraint clauses. Many organisations rely on legacy or template‑style restraints that were never tailored to the actual risks of particular roles.
Clauses often fail to identify what is genuinely legitimate to protect – such as specific client lists, pricing strategies or pipeline information – and instead apply broad, generic wording that is already difficult to enforce. Even if non‑competes are curtailed, well‑crafted confidentiality, intellectual property and conflict‑of‑interest provisions will remain central to risk management and should be strengthened now.
The second step is to gain a clear picture of where and why your organisation uses restraints. HR and legal teams should map which roles currently carry non‑competes or no‑poach clauses, how critical those roles are to client retention and growth, and what happens if those restraints become unlawful. This assessment will help shape alternative strategies: redesigned incentive schemes, clearer succession planning, stronger culture and engagement initiatives, and tighter information‑security controls.
A third, more strategic, step is to consider how and where to engage in the policy process. Pillay suggested that businesses that legitimately and proportionately rely on non‑competes should pay close attention to opportunities to consult or lobby government. Industry bodies and professional associations are likely to play a key role here, particularly in arguing for refinements to the high‑income threshold link and highlighting the real‑world damage that unfettered poaching could cause in relationship‑heavy sectors.
For now, much remains in flux. The reforms are targeted to come into effect in 2027, but details may shift as legislation is drafted and consulted on. What is certain is that the traditional reliance on non‑competes as a default protective tool is coming under sustained pressure. HR leaders who act early – by tightening contracts, clarifying their risk profile and rethinking retention in a more mobile labour market – will be best placed to navigate the transition.
As Pillay puts it, if and when the legislation passes, employers will need to determine whether their existing restraints have become unlawful and remove them where required. Until then, HR should stay close to developments, treat the next few years as a preparation window and be ready to adapt quickly: the rules of the talent game are about to change.
