The Government’s own analysis of proposed reforms to zero‑hours contracts estimates the annual cost to employers could range from £350 million at the low end to as much as £2.9 billion if all workers on such agreements are covered.
Range of costs and central estimate
The impact assessment — published alongside a consultation on changes to the Employment Rights Act 2025 — gives an "indicative central" figure of £1.1 billion a year for the set of measures under consideration. That figure assumes a restriction of the new rights to those working fewer hours, rather than automatically encompassing everyone on a zero‑hours contract.
| Coverage scenario | Estimated annual cost to business |
|---|---|
| Only those on the fewest hours | £350 million |
| Restricted to those working fewer hours (central) | £1.1 billion |
| All employees on zero‑hours contracts | £2.9 billion |
What the proposals would change
Under the reforms ministers are consulting on, employers could be required to offer a guaranteed weekly number of hours aligned to the worker’s existing workload; give staff reasonable notice of shifts; and compensate employees if shifts are cancelled, curtailed or moved at short notice. The consultation closes on 25 August and asks whether eligibility should extend to those working up to 48 hours a week, though officials indicate a likely threshold in the 8 to 20 hours area.
"The scale of these costs raises serious questions about whether the guaranteed hours reforms will actually deliver value for workers," said Helen Dickinson, chief executive of the British Retail Consortium.
Economic trade‑offs: wages, jobs and productivity
The Government argues the measures could have positive knock‑on effects for the wider economy, through improved worker wellbeing and engagement that might translate into higher productivity. The assessment cited research linking better wellbeing to labour market participation and fewer lost working days — noting that stress, depression and anxiety accounted for 22.1 million lost working days in 2024/25, equivalent to around £6.5 billion in lost output.
Yet business groups have warned the price tag could hit employment and investment. The assessment flags new administrative burdens, higher staffing costs and the possibility of reduced flexibility to meet fluctuating demand — effects that could feed through into slower revenue growth or lower capital spending. For firms operating on tight margins, particularly in retail and hospitality, that could translate into fewer entry‑level opportunities or pressure on pay and hours.
- Cost uncertainty: the wide range between £350m and £2.9bn reflects different policy scopes and potential behavioural responses by firms.
- Payment for disrupted shifts: the Government estimates workers could receive between £5 million and £1.2 billion because of rights to compensation when shifts are changed at short notice.
- Policy trade‑offs: benefits from better wellbeing are hard to quantify and may take time to materialise, while immediate costs fall to employers.
Implications for businesses and workers
For employers, the immediate questions are practical: how to roster staff, what to pay for cancelled time and how to absorb extra payroll and compliance costs without passing them on to consumers. Firms facing persistent demand volatility could respond by trimming hiring, automation or passing costs into prices, each with distinct implications for jobs, wages and inflationary pressure.
For workers, the central promise is stability — more predictable earnings and protection from last‑minute cancellations — which could reduce income volatility for those on insecure contracts. But the ultimate impact depends on the detail: narrower eligibility would reduce employer costs but also limit the number of people who gain the new rights.
The consultation period will test public and business appetite for different thresholds and design details. Policymakers will need to weigh the scale and distribution of immediate costs against longer‑term gains in productivity and labour market participation — outcomes that, as the Government notes, are challenging to put a precise monetary value on.
