Banning Zero-Hours Contracts Could Cost Businesses Up to £3bn a Year

The UK government wants to ban zero-hours contracts — a type of work agreement where employees are not guaranteed any set number of hours each week. A new government report says this ban could cost businesses between £350 million and £2.9 billion every year. The report was published on Wednesday and looks at how the change would affect workers, employers, and the wider economy.

Zero-hours contracts are used in many industries, including retail, hospitality, and healthcare. Workers on these contracts do not know from week to week how many hours — or how much money — they will earn. The government says millions of people live with this uncertainty, and that ending it will help them feel more stable and less stressed.

The government's report says the reforms are expected to support growth by improving worker wellbeing and engagement. Research shows that when workers feel better and less anxious, they tend to be more productive. The report also points out that stress, depression, and anxiety led to 22.1 million lost working days in 2024/25, costing the economy around £6.5 billion in lost output.

Under the new rules, workers would have the right to be paid if their shifts are cancelled or changed at short notice. The government estimates those payments could total between £5 million and £1.2 billion per year. Ministers are still deciding exactly which workers the rules will apply to, with discussions focused on those working between eight and 20 hours a week.

Not everyone is happy with the plan. Helen Dickinson, the head of the British Retail Consortium, said the costs could not come at a worse time, pointing out that businesses are already dealing with higher national insurance bills. She also warned that the changes could hurt young people's job chances if employers decide to hire fewer people to save money.

The British Chambers of Commerce also raised concerns about the costs and the timing of the report. Its policy director, Kate Shoesmith, said the government had previously claimed the entire Employment Rights Act would cost around £1 billion — but this single report shows costs far beyond that figure. She said now is not the time to make it even more expensive for employers to hire young people.

Leaders in the hospitality industry pushed back as well, saying the government should be encouraging businesses to hire more people rather than adding costs. Neil Carberry from the Recruitment and Employment Confederation warned that the proposals could weaken parts of the job market that currently work well. He called for more talks with the government to make sure any final policy is fair and practical.

Supporters of the ban say the worries are overblown. A Trades Union Congress spokesperson said the Employment Rights Act is expected to deliver a £10 billion boost to the economy — far more than the reported costs. She called the concerns scaremongering and said the reforms bring the UK closer to working standards seen across Europe.

The government says it has not made any final decisions yet and is still consulting with businesses and workers. A government spokesperson said the goal is to end exploitative contracts where workers carry all the financial risk when hours and earnings are unpredictable. Officials say they want to make sure the new rules work fairly in the real world before they are put in place.