If you employ anyone on a zero hours or similar contract, you have until 11.59pm on 25 August to respond to the government’s consultation on how guaranteed hours and related rights will work, after government impact assessments put the cost of the reforms to business at up to £2.9bn a year.
The measures sit in the Employment Rights Act 2025, which received royal assent on 18 December 2025. The Department for Business and Trade’s consultation, published on 2 June and covering England, Scotland and Wales, describes three rights: “guaranteed hours, where the number of hours offered reflects the hours worked by a qualifying worker during a reference period”, “reasonable notice of shifts and changes to these” and “payment for shifts cancelled, curtailed or moved at short notice”.
At present a zero hours contract sets no minimum number of hours; under the reforms the guaranteed offer would reflect the hours a worker has been doing.
What officials think it will cost
The impact assessments model three versions of the policy. Bringing every employee on a zero hours contract within the scheme would cost businesses £2.9bn a year, officials calculated. Limiting the new rights to people working fewer hours would bring that down to £1.1bn a year, and covering only those on the fewest hours would cost at least £350m a year. The analysis expects hospitality and retail to be the sectors most affected.
The assessment says companies would face new administrative requirements, extra staffing costs and lost revenue, and that employers would find it harder to adjust when demand changes, with possible knock-on effects on revenue and investment.
It also lists expected wider benefits: higher productivity through improved worker wellbeing and engagement, better workforce planning, and a more level playing field for employers who already offer secure and predictable work. The document describes those benefits as hard to quantify.
Reaction from employers and unions
Kate Nicholls, chair of the trade body UKHospitality, said: “The eye-watering cost of these reforms comes at the worst possible time for hospitality businesses, arriving on the heels of more than £5 billion in additional employment costs in the past two years.”
She added: “More than 100,000 jobs have already been lost in hospitality as a result and the extraordinarily high cost of employment continues to restrict job opportunities, particularly for young people. This is on top of hospitality being disproportionately hit by business rates and our high rate of VAT. These reforms add yet more cost, at a scale that far outweighs the cost benefits for employees.”
The Federation of Small Businesses, which represents small employers and the self-employed, warned of “soaring unemployment” from what it called a “chaotic approach to employment reform”.
Helen Dickinson, chief executive of the British Retail Consortium, called the cost to employers “hugely disproportionate to the benefits for employees”, adding: “Adding further costs [on businesses] when youth unemployment is soaring risks being a hammer-blow to young people’s job prospects, at precisely the time businesses across the country need to be creating more opportunities.”
Neil Carberry, the Recruitment and Employment Confederation’s chief executive, said he believed officials had underestimated the compliance cost. “Even so, government’s data suggests it will cost employers up to £8 million every day, or roughly the annual wage bill for 137,000 full-time workers between 18 and 20 years old on national minimum wage,” he said. “It is time to think again.”
The Trades Union Congress said much of the projected cost rested on employers continuing to cancel shifts late. “This is an upper estimate of a very wide range and nearly half of this figure is based on the assumption that employers will continue to cancel shifts at short notice,” a spokesperson said. “The aim of this legislation is to stop this practice and give variable hours workers security and stability, so good employers have nothing to fear.”
A spokesperson for the government said: “We are absolutely 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 and while no final decisions have been made, we’re consulting to get the detail right and ensure this works in the real world.”
