ZERO-HOURS REFORMS COULD COST BUSINESSES £300M

But the contracts aren’t being “banned”

The Government’s plans to reform zero-hours and similar contracts could cost UK businesses at least £300 million a year – and potentially considerably more.

Its latest analysis estimates direct employer costs of between £350 million and £2.9 billion annually, with a net cost, after monetised benefits are considered, of around £300 million to £1.4 billion a year.

Those are significant numbers, particularly for businesses operating in sectors such as hospitality, retail, care and leisure, where staffing requirements can change quickly.

But there is an important distinction behind the headlines: zero-hours contracts themselves are not being banned.

The Government’s consultation is instead focused on ending what it describes as one-sided flexibility. The Employment Rights Act 2025 introduces three key rights: guaranteed-hours offers based on hours actually worked, reasonable notice of shifts and changes, and payments where shifts are cancelled, moved or curtailed at short notice.

Workers will still be able to choose the flexibility of a zero-hours arrangement if that genuinely suits them.

So where does the cost arise?

Potentially from employers having to pay for some of the flexibility they currently obtain at little or no direct cost. Cancelling a shift at short notice could trigger compensation. Regularly giving someone more hours than their contract provides could result in an obligation to offer those hours on a guaranteed basis. Employers may also face additional administration, scheduling and workforce-planning costs.

The eventual impact will depend heavily on the regulations, which are still being consulted upon. Details including eligibility thresholds, reference periods and how “reasonable notice” will work could make a considerable difference to individual employers.

For businesses, therefore, this is not simply a question of whether they can continue using zero-hours contracts.

The more important question is how much their current model relies on unpredictability and short-notice flexibility – and what that flexibility might cost once the new rules take effect.

Now is a sensible time to examine working patterns, contracts and rota practices so that any potential exposure can be identified before the detail is finalised. If you have any questions about this or would like to discuss in more detail, please get in touch and one of the team will be happy to help.