UK Zero-Hour Contract Reforms Could Cost Businesses £2.9 Billion

The Government of the United Kingdom published an impact assessment indicating that proposed reforms to zero-hour contracts could cost businesses up to £2.9 billion per year. The measures, part of the Employment Rights Act 2025 and Angela Rayner's workers' rights agenda, would grant flexible employees the right to guaranteed-hour contracts and mandate payment for shifts cancelled at short notice.

While the government's central estimate places the annual cost at £1.1 billion, the net cost to the economy is projected between £300 million and £1.4 billion due to the social value of increased worker security. Skills Minister Baroness Jacqui Smith defended the plan, stating the reforms ensure workers are fairly paid and will support economic growth by improving productivity and wellbeing.

Trade bodies have criticized the reforms as disproportionate. The British Retail Consortium and UKHospitality warned that the costs arrive at a critical time, with retailers facing additional expenses to update HR and payroll systems. The British Chambers of Commerce and the Federation of Small Businesses warned the changes could deal a hammer blow to struggling firms and exacerbate a youth unemployment crisis.

Conversely, the Trades Union Congress defended the legislation, arguing that the reforms will provide essential security and deliver a £10 billion boost to the economy. The Department for Business and Trade is currently conducting a consultation on these measures, which closes on 25 August.