The Labour government's ban on exploitative zero-hours contracts will cost businesses up to £2.9bn per year in direct costs, according to official documents released on Wednesday. The changes, which were confirmed under the previous administration of Sir Keir Starmer and are now set to be rolled out by new Prime Minister Andy Burnham, aim to end arrangements where employers take all the flexibility and workers bear all the risk.
Government admits cost and flexibility concerns
Labour Party government documents show the “direct cost” to employers could reach £2.9bn annually. While the government claimed the changes would “support growth through improved worker wellbeing”, it also admitted they “could make it harder for employers to respond to changes in demand”, potentially hitting business output. Officials acknowledged on Wednesday that the changes will “increase administrative costs and reduce flexibility for employers”.
The party pledged to ban “exploitative” zero-hours contracts in its manifesto. Under the new rules, workers who qualify will be entitled to receive reasonable notice of their shifts and a payment if their shifts are cancelled, moved, or curtailed at short notice. This will stop workers travelling into work for shifts or arranging care for children and relatives, only for a shift to be cancelled at the last minute without pay.
Business leaders warn of unworkable plans
Andrew Griffith, the shadow business secretary, said the plans were unworkable. “With a growing crisis of youth unemployment and businesses facing record taxes, [Andy] Burnham urgently needs to reverse Angela Rayner’s union-inspired, ‘back to the 1970s’ plans,” he said.
Kate Nicholls, chair of UKHospitality, described the “eyewatering cost of these reforms” as arriving after more than £5billion in additional employment costs over the past two years, with over 100,000 hospitality jobs already lost. Helen Dickinson, chief executive of the British Retail Consortium, warned the published estimates “only tell part of the story, as retailers will have to fork out hundreds of millions of pounds to update their HR and payroll systems.”
Chambers and government respond
Kate Shoesmith from the British Chamber of Commerce said: “The increased cost to businesses of the proposed changes to zero hours contracts will be a further hammer blow for many firms struggling to keep their heads above water.” She added: “We are already facing a youth unemployment crisis now is not the time to make it even more costly for employers to hire.”
A government spokesperson defended the plans, 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: “These reforms will give workers in every postcode greater income security and predictability of hours and while no final decisions have been made, we're consulting to get the detail right and ensure this works in the real world.”
