Employee side hustles: what are the risks for employers?

An increasing number of employees are engaging in 'side hustles' as part of a portfolio career, a trend driven by the cost of living crisis, and a desire – perhaps triggered during the Covid-19 pandemic – among employees to engage in monetised activities they enjoy.

From an employer’s perspective, such outside activities can deliver both risks and benefits.

Some employers may decide that side jobs will not be acceptable as a general rule, while others may allow their staff to undertake side hustles, subject to the employer being notified for awareness.

It is therefore crucial that employers consider how they will respond to employees who have side hustles, so that all parties can be clear how these should be treated.

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Potential benefits

As a general rule, there is nothing to prevent an employee from engaging in a side hustle, providing they are carrying it out outside the normal working hours of their 'main' employer, and the side hustle is not in breach of their contract of employment.

If this is the case, employers can find that there are benefits from employees with side hustles. For example, employees may develop transferable skills that support their main employment, such as developing business acumen and entrepreneurship.

Activities outside of work, especially those carried out as much as a hobby as for remuneration, can also be beneficial for wellbeing and mental health.


Potential risks

Nevertheless, employers may still be concerned, especially if the side hustle comes into conflict with the employee’s main job. Areas of concern may include employees who use their normal working hours to work on their side hustle (at the expense of their performance of their main role), ownership of any intellectual property created during a side hustle, and reputational issues that may bring the main employer's business into disrepute.

Employers may also find it challenging to monitor the working hours of employees who work elsewhere, which is important for compliance with the Working Time Regulations.

Issues may also arise in respect of employees who conduct side hustles while on sickness absence from their main employer, especially if the employee is being paid by the employer or an insurer during this time.

Very few employers would begrudge an employee who used a craft or activity to support their recovery. However, the position is much less clear if this hobby starts to deliver revenue for the employee, and an employer might reasonably conclude that it would be inappropriate for this to happen if an employee is on sick leave.

To avoid this situation, employers should communicate with their staff about what is expected and acceptable about external roles, and allow these to be discussed openly if required.

At the same time, it is important to keep employment contracts and HR policies under review to ensure they are drafted to include terms that, if necessary, prohibit a worker from carrying out secondary employment, or that require prior permission to be obtained before any external activities are undertaken.

If appropriate, this may also include restrictive covenants if there is a concern that an employee’s side hustle is actually competing with the business of the main employer.

James Champness is senior associate at law firm GQ|Littler