Zero-Hours Contract Reforms Could Cost UK Employers Up to £3bn a Year

UK businesses could face costs of up to £3 billion a year under planned reforms to zero-hours contracts, with employers in sectors reliant on flexible staffing potentially facing significant changes to the way they manage their workforce.

An official government impact assessment published alongside an ongoing consultation estimates the measures could cost employers between approximately £350 million and £2.9 billion annually, depending on how the final rules are implemented. Around £1.2 billion of the estimated costs could come from requirements relating to compensation when shifts are cancelled at short notice.

The reforms form part of changes to employment rights designed to tackle what the government describes as “one-sided flexibility” in the labour market.

Under the measures, qualifying workers would gain new rights to guaranteed hours reflecting the hours they regularly work during a reference period, reasonable notice of shifts and changes to those shifts, and payment where shifts are cancelled, curtailed or moved at short notice.

The changes do not amount to a straightforward abolition of zero-hours working. Workers who prefer the flexibility of a zero-hours arrangement will be able to remain on one rather than being required to accept guaranteed hours.

The reforms could be particularly significant for health and social care, where providers frequently rely on flexible staffing arrangements to respond to changing care packages, sickness, unexpected absences and fluctuations in demand.

New requirements around guaranteed hours, shift notice and cancelled shifts could therefore require some care organisations to review how they currently use zero-hours and other flexible staffing arrangements. The measures will also extend protections to qualifying agency workers, although the way those rights operate will differ and further detail will be set out through regulations.

Business groups have raised concerns about the potential cost of the reforms and their impact on organisations that rely heavily on flexible workers. Employers have warned that restrictions which are too rigid could make it harder to respond to changing demand and could affect decisions about recruitment.

The government argues that the reforms will provide greater security and predictability for workers while still allowing people who genuinely want flexible working arrangements to retain them.

Although the reforms have been legislated for, important details about how the new rights will operate in practice are still being determined.

A government consultation on the implementation of the zero-hours and similar contracts reforms remains open until 25 August 2026, giving employers, workers and other interested organisations an opportunity to respond.

For health and social care employers using zero-hours, low-hours or agency staffing models, the detail that follows the consultation could have significant implications for workforce planning and employment costs.

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