Plans to restrict zero-hours contracts will create barriers to opportunity by making it more expensive for companies to employ young people, retailers, business leaders and the hospitality trade body have warned.
The government intends to give new rights to all workers on zero-hours contracts, which at present do not specify a minimum number of hours of employment. The reforms would force companies to give staff a guaranteed number of hours a week reflecting their workload, to provide reasonable notice of shifts, and to pay workers for shifts that have been “cancelled, curtailed or moved at short notice”.
The British Retail Consortium, UKHospitality and the British Chambers of Commerce warned that the move could “worsen the jobs crisis”, pointing to the possible consequences for the number of Neets, the one million young people not in education, employment or training.
The three bodies called on the government to delay implementation so that a “proportionate” approach can be developed, and to set guaranteed hours at eight hours a week or fewer so that the rules target “genuinely low hours work”.
The measures sit under the Employment Rights Act 2025, and ministers have been consulting on the detail since June. The consultation closes on 25 August.
An official impact analysis of the plans found they could impose costs of up to £3 billion a year on employers, with companies facing extra red tape, higher staffing costs and lost revenue. The analytical note published alongside the consultation puts the direct cost to business at between £350 million and £2.9 billion a year.
The analysis found that sectors such as hospitality and retail, which have already borne the brunt of increases in employers’ national insurance contributions and the minimum wage, would be worst affected. It also warned that the plans would make it harder for employers to respond to changes in demand, with potential knock-on effects on revenue and investment.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Government must stamp out exploitation, not flexibility, with employment reforms that close loopholes, not doors to opportunity.
“With more than a million young people out of work, education or training, we need policies that encourage businesses to hire and create pathways into employment. Get this wrong, and we’ll close off opportunities for the very people these reforms are intended to help.”
Allen Simpson, chief executive of UKHospitality, said: “Hospitality can deliver jobs in every postcode, but the reforms as they stand will add yet more cost, reduce flexibility for staff who need it and impact job opportunities for young people.”
Shevaun Haviland, director general of the British Chambers of Commerce, said: “These guaranteed hours reforms risk being hugely counterproductive for growth, damaging recruitment and investment. For many employees and businesses, zero-hours contracts are a valuable and legitimate form of flexible work.”
The Confederation of British Industry said that higher national insurance contributions, increases to the living wage, new costs associated with the Employment Rights Act and wider pressures from energy bills, taxation and borrowing costs were all squeezing recruitment and investment budgets.
“The same challenges that are holding back growth are hurting young people and their ability to enter the labour market,” Rain Newton-Smith, the CBI chief executive, said. “For it to work, growth must be at the heart of the youth employment strategy. Treating them as two separate challenges, and assuming the businesses can deliver opportunities without growth, will result in more young people falling into unemployment and inactivity.”
Research by the Chartered Institute of Personnel and Development, the HR trade body that has previously warned of unintended consequences from the reforms, found that 65 per cent of employers using zero-hours contracts expect their HR and management costs to rise as a result of the changes, while 31 per cent anticipate that they could have to make redundancies. A further 33 per cent expect to increase their use of self-employed contractors or other temporary and casual workers, raising concerns that efforts to tackle insecure employment could simply shift workers into other forms of non-permanent work.
A government spokesman said: “We are committed to ending exploitative zero-hours contracts, where workers bear all the financial risk when hours, shifts and earnings are unpredictable.
“These reforms will give workers in every postcode greater income security and predictability of hours. We have not made final decisions yet as we have been consulting since June to make sure we get the detail right.”
