The Labour Party government has announced plans to ban exploitative zero-hours contracts, a move expected to cost businesses up to £3 billion annually. This commitment, outlined in the party’s manifesto, aims to protect workers from unpredictable and unfair employment practices.
Official documents released on Wednesday reveal the “direct cost” to employers from these changes could reach £2.9 billion per year. While the government states the reforms are intended to support economic growth by improving worker wellbeing, it acknowledges potential challenges for employers, including increased administrative expenses and a reduction in staffing flexibility that may affect business output.
The initiative, originally introduced under the previous Sir Keir Starmer administration, is set to be implemented under the leadership of new Prime Minister Andy Burnham. The new rules will still allow those who prefer the flexibility of zero-hours contracts to retain that choice. However, exploitative contracts-where employers hold all the flexibility while workers bear all the risk-will be prohibited.
READ MORE: Quinton’s Highfield Farm Park Begins Cleanup After Traveller Eviction
READ MORE: How to Secure Over 20 Free and Affordable Tickets for Family Days Out: Insider Tips
Qualifying workers will gain the right to receive reasonable notice of their shifts and compensation if shifts are cancelled, moved, or shortened at short notice. This aims to prevent situations where employees arrange childcare or travel for work only for their shifts to be cancelled without pay.
Critics have voiced strong opposition to the reforms. Andrew Griffith, the shadow business secretary, described the plans as impractical, stressing the challenges posed by youth unemployment and high business taxes. He urged Andy Burnham to reconsider what he called “union-inspired, ‘back to the 1970s’ plans.”
Business leaders have also raised concerns about the financial impact. Kate Nicholls, chair of UKHospitality, referred to the “eye-watering cost of these reforms,” especially following over £5 billion in additional employment costs and the loss of more than 100,000 hospitality jobs in recent years. Helen Dickinson, chief executive of the British Retail Consortium, highlighted further expenses for retailers, who will need to invest significantly in updating HR and payroll systems.
Kate Shoesmith, from the British Chamber of Commerce, warned the increased costs could be “a further hammer blow for many firms struggling to keep their heads above water,” emphasising that the timing is problematic amidst a youth unemployment crisis.
A government spokesperson defended the proposed changes, stating: “We are absolutely committed to ending exploitative zero hours contracts, where workers bear all the financial risk when hours, shifts and earnings are unpredictable.” They added that while final decisions have yet to be made, ongoing consultations aim to refine the details to ensure the reforms are effective and practical across the country.