For a small business wishing to expand without the expense of increased overheads, outsourcing may seem like an ideal solution, providing greater flexibility and extended capabilities, minus the costs and burdens associated with remuneration of permanent staff. Unfortunately, although offering immediate time and cost savings, outsourcing is not quite as simple as it may first appear, and is in fact fraught with danger!
A company’s customer base is arguably its most valuable asset. Organisations employing a large contract-based workforce are at particular risk of having this asset poached from within, by both current and former staff. Sadly, this issue is undoubtedly on the rise, due to the current trend towards a more mobile, virtual and often transient workforce, where loyalty is difficult to engender. The protection of a company’s business interests, particularly in relation to retaining its valued clients, is a complex and serious issue for any organisation, requiring both careful planning and a multi-dimensional approach.
To protect their interests, employers may attempt to restrain a contractor from competing with their business by drafting non-solicitation covenants – also known as ‘non-compete’ or ‘restraint of trade’ clauses. These clauses often try to restrain a contractor from approaching or soliciting the custom of the business’s clients while still engaged with the business, and for a defined period of time once the employment relationship has concluded. Restraint of trade clauses are governed by the Restraints of Trade Act 1976, but are only valid to the extent to which they are determined ‘reasonable’ in protecting a legitimate interest, and where they are not against public policy or in conflict with the Competition and Consumer Act 2010, which promotes fair trading and competition. For this reason, care should be taken when drafting restraint of trade clauses to ensure their enforceability and it is advisable to seek legal advice in this matter, before proceeding.
There are many advantages for both parties in signing a legally-binding agreement with a restraint of trade clause at the start of a business relationship. A well-drafted agreement establishes a professional tone for the partnership and creates expectations in the contractor’s mind. This avoids confusion around the boundaries of client contact and solicitation, deters potential poachers and provides an employer with leverage if the agreement is not honoured.
It is important to note here that while establishing deterrents may be useful, there are other more fundamental means to protect your business from would-be poachers. The first of these is a careful contractor selection process and stringent proving period. Hiring contractors that you can trust, by doing thorough reference checks, is the first step. Ensuring that your staff are ethical, honest and have integrity, is essential. Once a contractor is on board, it is advisable to use the probation period to ensure that they are complying with confidentiality requirements and approaching their work in an ethical manner. Start by giving them access to smaller contracts, so that if you lose the client to poaching it isn’t a major loss.
Last, but certainly not least, give your clients and contractors a good deal. If you deliver an excellent service to your clients you will engender loyalty, withstanding the temptation of a lower-priced offer from a competitor. Similarly, if you treat your contractors well by giving them a good revenue stream and creating a positive relationship with them that is based on mutual respect, open communication and trust, you are more likely to benefit your business by reducing turnover and generating greater loyalty and goodwill, thus protecting your business from poachers.