The BRC has urged the government to rethink its zero-hours contract reforms after official analysis revealed the measures could cost businesses as much as £2.9bn a year.
New Department for Business and Trade analysis found that the package of reforms covering guaranteed hours, notice of shifts and compensation for last-minute cancellations could directly cost employers between £350m and £2.9bn annually, depending on how the final rules are designed. Its indicative central estimate stands at £1.1bn a year.
The measures form part of the Employment Rights Act 2025 and are designed to tackle what the government describes as “one-sided flexibility” in the labour market.
Under the reforms, qualifying employees will have the right to be offered guaranteed hours based on how much they regularly work, while eligible staff will also be entitled to reasonable notice of shifts and compensation when shifts are cancelled, moved or cut short at short notice.
Workers who prefer the flexibility of a zero-hours contract will be able to reject a guaranteed-hours offer and remain on their existing arrangement.
However, the government’s own analysis acknowledged that the changes would increase employers’ administrative costs, reduce flexibility and potentially make it harder for companies to react to fluctuations in demand.
Retail is among the industries expected to feel the greatest impact, alongside hospitality, entertainment, support services, education and health and social care, as the sectors make greater use of variable staffing and short-notice scheduling.
BRC chief executive Helen Dickinson said the scale of the estimated costs raised “serious questions” over whether the reforms would deliver sufficient benefits to employees to justify the burden on businesses.
She warned that the official estimates did not capture the full expense facing retailers, which could have to spend hundreds of millions of pounds updating HR and payroll systems to comply with the changes.
Dickinson said the new burden came at a particularly difficult time for the sector after retailers absorbed what the BRC estimates to be a £6.5bn rise in employment costs over the past two years as a result of higher employer National Insurance contributions and increases to the National Living Wage.
The trade body also warned that further increases to the cost and complexity of hiring could hit young workers particularly hard by reducing the number of flexible and entry-level roles available.
The government’s analysis similarly identified young people aged 16 to 24 as one of the groups most likely to be affected by the reforms, although it argues they are also among those who stand to benefit most from greater security over their working hours.
The government maintains that the changes will improve worker wellbeing, encourage better workforce planning and boost productivity.
Its research found that 53 per cent of people in insecure work said fluctuating income affected their ability to pay for essential expenses, while 58 per cent wanted consistent guaranteed hours matching their normal working patterns.
It estimates the reforms could result in workers receiving between £5m and £1.2bn a year in payments for shifts that are cancelled, moved or shortened at short notice, depending on the final policy settings.
After taking into account benefits that can be monetised, government modelling puts the overall net cost of the package at between £300m and £1.4bn a year. Ministers said other potential benefits, including improvements to wellbeing and lower childcare and travel costs, could not be reliably valued.
Dickinson called on ministers to focus on tackling genuinely insecure employment without penalising businesses that use flexible contracts responsibly, warning that further costs could undermine retailers’ ability to create jobs.
The finer details of the reforms have yet to be decided. A government consultation, which includes questions over which workers should qualify and how much notice businesses should provide for shifts, closes on 25 August.
The zero-hours provisions have not yet come into effect and their implementation timetable will be confirmed after the consultation and subsequent regulations are finalised.
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