In a landmark decision announced in the latest federal budget, the Australian government has unveiled plans to ban non-compete clauses for employees earning less than $175,000 per year. Set to take effect in 2027—pending the re-election of the Albanese government—this reform is designed to increase job mobility, boost wages, and foster a more dynamic labour market.

What Are Non-Compete Clauses?

Non-compete clauses restrict employees from working for a competitor or starting a similar business for a set period after leaving a job. While intended to protect businesses from losing trade secrets and key client relationships, these clauses have been widely criticised for limiting career growth and suppressing wages.

A 2023 survey found that nearly one in five Australian workers were bound by such clauses, affecting industries ranging from tech and finance to childcare and hospitality.

Why the Ban?

The government argues that non-compete clauses stifle competition, hinder economic growth, and limit opportunities for workers. By removing these restrictions, the reform aims to:

✅ Increase Wages – Studies suggest that lifting non-compete restrictions could drive wage growth comparable to tax cuts.

✅ Enhance Job Mobility – Workers will have the freedom to seek better opportunities without fear of legal repercussions.

✅ Boost Productivity – Encouraging the free flow of talent across industries will drive fresh ideas and innovation.

How Will This Impact Employers?

While some businesses are concerned about losing top talent to competitors, the reform encourages companies to focus on retention strategies beyond legal contracts. Employers will need to enhance their Employee Value Proposition (EVP) by offering:

✔ Competitive salaries

✔ Career development opportunities

✔ A positive workplace culture

What’s Next?

The government has yet to clarify how other restrictive clauses—such as non-solicitation agreements, which prevent employees from taking clients or colleagues to new jobs—will be affected. Industry leaders and legal experts will be watching closely as further details emerge in the coming years.

A Win for Australian Workers

This bold reform aligns with global trends towards labour market flexibility and economic dynamism. While businesses will need to adapt, the long-term benefits for workers and the economy could be substantial. With more Australians empowered to seek better opportunities, the future of work in Australia is set to be more competitive, innovative, and fairer for all.