UK zero-hours contract ban could cost businesses up to £2.9bn annually

The U.K. government's proposed ban on zero-hours contracts could cost businesses between £350 million and £2.9 billion annually, according to an official impact assessment published on Wednesday. The analysis, released as part of a consultation on the policy's implementation, sparked immediate criticism from business groups who warned the costs could harm employment, particularly for young people, while ministers and unions defended the reforms as necessary to end exploitative practices.

The reforms, a key part of the government's Employment Rights Act, aim to provide workers with greater security by guaranteeing them a certain number of hours and requiring employers to pay compensation for shifts cancelled at short notice. The total cost to employers depends heavily on the final policy design, specifically the threshold of weekly hours at which the new rights apply. The government's preference is for a threshold between eight and 20 hours per week, which would result in costs at the lower end of the estimate. However, if the policy were extended to anyone working up to 48 hours a week, as some unions have advocated, the annual cost could reach the upper estimate of £2.9 billion.