The government released official analysis indicating that proposed employment reforms targeting zero hours contracts could impose annual costs on businesses ranging from £350m to £2.9bn. The Labour government’s initiative aims to require employers to offer guaranteed hours to workers after they reach a certain threshold of work, cutting down on the practice of hiring staff with no guaranteed minimum hours.
The precise cost to employers depends on where the policy threshold is eventually set. If applied to workers at 48 hours per week, as some union organizations have advocated, expenses would be higher. The government’s stated preference is for a threshold between 8 and 20 hours weekly. At the upper end of estimates, approximately £1.2bn would stem from compensation payments for cancelled shifts, while the middle estimate places total costs at £1.1bn annually.
Government officials identified potential trade-offs, including increased administrative burdens and reduced operational flexibility for companies responding to demand fluctuations. The analysis noted that hospitality and retail sectors, which frequently rely on zero hours arrangements, would face the most significant impacts. However, officials also projected a potential £10bn economic boost from improved worker wellbeing and productivity, which could reduce the net average cost to between £300m and £1.4bn.
Business organizations contended that the projected costs are disproportionate relative to worker benefits. The British Chambers of Commerce and British Retail Consortium raised concerns about timing, citing existing economic pressures and the additional expense of updating payroll systems. Union representatives countered that most costs would only materialize if employers continued cancelling shifts without notice, and that the legislation aims to eliminate such practices. Data showed 1.23 million people held zero hours contracts, representing a significant annual increase in this employment category.
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