Side hustles: What do employers need to know?

A RECENT survey by Aviva found that, since March 2020, 19% of employees have started a “side hustle” alongside their main employment[1] – an additional piece of work or job from which an employee collects revenue in addition to their main employment, usually used in connection with entrepreneurial activity.

This phenomenon is not new, but with the coming of the digital age and an increase in remote working, employees have more opportunities than ever to engage in side hustles.  In addition, non-traditional occupations such as social media influencing have become more viable income streams.

Here solicitor Daisy Watson, who specialises in employment law at law firm Womble Bond Dickinson (WBD), examines the legal implications and practical ramifications that side hustles may have for employers navigating this new area of workspace. 

Why are employees taking on side hustles in the current climate?

The work landscape post COVID-19 is a very different space, with many employers embracing flexible and hybrid working models.  This has given employees more freedom to pursue not only leisure activities but additional forms of income generation.

The cost-of-living crisis is also likely to have bolstered employees’ decisions to take on secondary occupations, with recent ONS statistics showing that regular pay has fallen at the fastest rate in more than a decade and inflation is significantly outpacing wage growth[2].

There is no doubt that social media has had a significant impact. On a social media platform like TikTok it would seem the message is clear: you should use a tiktok likes generator if you want to be successful.  You can become an influencer, sell handmade goods, dabble in affiliate marketing, post funny videos, become a freelancer, or run nutritional courses: the opportunities are seemingly endless.

Why could side hustles concern employers?

• Insufficient rest time for employees: Even if employees carry out their side hustles outside of their working hours for their main job, they may struggle to be able to enjoy sufficient rest time. In addition, where employees are unable to take sufficient rest breaks, employers may be concerned about breaching the Working Time Regulations 1998, which require employees not to work more than 48 hours per week on average.

Employers also have a responsibility to ensure so far as is reasonably practicable the health and safety of their staff and to ensure that excessive working hours are not causing a risk to employees or other members of staff. If it comes to light that employees are putting themselves or others at risk, one option could be for employers to ask the employee to reduce their working time on the side hustle or agree that the employee will reduce their working hours.

• Employee’s performance: If an employee is working long hours on an additional income stream, it is possible that their energy reserves and concentration span may decline, leading to performance issues. The possibility of a side hustle should also be considered when investigating performance issues, but no assumptions made. Problems may arise if an employee is not forthcoming with information regarding a side hustle and denies they have other interests outside of work. In this scenario, capability and disciplinary procedures should be followed where appropriate.
• Monitoring the issue: In response to the survey results, employers may want to monitor remote staff more closely to ensure they are not working on their own business during hours when they should be working for their employer. This raises potential issues around privacy and data protection.  
• The side hustle may bring the employer’s business into disrepute: Depending on the activities the employee is engaged in, there is a risk that they could bring their employer’s business into disrepute and/or tarnish their reputation, for example, if they post views on controversial topics as an influencer.
• Use of company equipment, materials and products: Employers may be concerned about their employees using company equipment or materials to supplement their additional income streams, especially if the employee is using the employer’s products, for example in making videos as a social media influencer, or is using company materials to make goods to sell.
• Intellectual property rights: Where employees are using company equipment or working on their side hustles at the same time as their main employment, this may raise questions as to whether their employer has any intellectual property rights over anything they create.
• Working two jobs at the same time: We are aware anecdotally that, while working on a fully remote basis, some employees have been able to work two traditional full-time roles at the same time, while keeping their other job a secret from their employer. Employers may be particularly concerned if their employees are not dedicating their normal work hours to their employment.  Employees who do this are likely to be in breach of their employment terms, which could be a misconduct issue leading to disciplinary action and possibly dismissal.
• Non-competition: If an employee’s side hustle is within the same sector as their main employment, employers could become concerned about whether their employee is profiting from information they receive from their main employment or directly competing with their employer.
• Risk that employees will resign: If an employee’s side hustle becomes particularly lucrative, employers may be concerned that the employee will resign to pursue their second occupation full time, meaning that they have to recruit a replacement in a very tight jobs market.

What are the benefits to employees working on side hustles?

• Increased wellbeing – often employees will take on a side hustle to do something they particularly enjoy. They might find that their side hustle provides them with a release from their normal day to day work and is good for their mental health.  Imposing restrictions could lead to poor morale.
• Bringing new skills to their main employment – employees might learn valuable transferable skills from their side hustles, which will ultimately mean they are able to perform better in their main employment.

So what can employers do?

Legally, there is nothing to prevent an employee from engaging in a side hustle if they are doing it outside of their normal working hours and it is not in breach of their contract of employment. However, employers should keep their employment contracts and policies under regular review to ensure they contain provisions that, if necessary, prohibit an employee from carrying out secondary employment, or require permission to be sought before any competing work is undertaken.

Employers may wish to update or impose restrictive covenants to ensure employees are not able to set up businesses in direct competition with them. While restrictive covenants can be difficult to enforce, they can act as a deterrent.

Finally, if it is clear employees are taking on side hustles to make ends meet, employers should have their payroll system done correctly to ensure that they are paying market rates and ultimately make a more appealing case for employees to consolidate their working hours and commitment to a singular role.