In a significant reform anticipated in the 2025 federal budget, millions of Australian workers will soon find it easier to pursue better job opportunities or launch their own businesses. The government plans to eliminate non-compete clauses in employment contracts for low- and mid-wage employees, a move that aims to stimulate job mobility and entrepreneurial ventures.
Non-compete clauses restrict individuals from joining rival firms or starting their own competing businesses after leaving their current employer. These clauses have proliferated across various sectors, including childcare, construction, and hairdressing, and are often a barrier to career advancement, particularly for lower-paid workers. The government’s decision is rooted in findings from the Competition Review, which identified the pervasive nature of these contractual agreements and their negative impact on wage growth.
Treasurer Jim Chalmers articulated the intent behind this reform, stating that individuals shouldn’t need legal assistance to progress in their careers or to follow entrepreneurial aspirations. Under the proposed changes, these restrictive clauses will be abolished for workers earning less than $175,000—the threshold defined in the Fair Work Act. The review indicates that approximately three million workers will benefit from this reform, potentially leading to wage increases of between two and four per cent, translating to an average boost of $2,500 annually.
Additionally, the government is focusing on addressing practices that suppress wages within businesses, such as collusion between companies to maintain low pay or “no poach” agreements that prevent them from hiring each other’s employees. There are discussions about extending the ban on non-compete clauses to higher-income workers in the future.
The anticipated reforms are expected to not only enhance employee wage potential but also contribute to a more dynamic economy, with estimates suggesting an increase in annual GDP of up to $5 billion. This change is viewed as a pivotal step toward fostering productivity and tackling inflation.
To provide time for businesses and employees to adjust to the new regulations, these reforms are set to come into effect in 2027. The proposed changes mark a significant shift in the Australian labour market, aimed at empowering workers and encouraging economic growth through increased mobility and entrepreneurship.