Plans to restrict zero-hours contracts could make it more expensive for businesses to employ young people and reduce opportunities for those trying to enter the workforce, leading business groups have warned.
The government plans to introduce new rights for workers on zero-hours contracts, which currently do not guarantee a minimum number of working hours. Under the proposed reforms, employers would have to offer workers a guaranteed number of hours based on their usual workload.
Companies would also be required to provide reasonable notice of shifts and compensate employees when shifts are cancelled, shortened or moved at short notice.
The British Retail Consortium, UKHospitality and the British Chambers of Commerce have warned that the proposals could worsen Britain’s employment problems, particularly for young people who are not in education, employment or training.
The groups have urged ministers to delay the changes while further details are developed. They are also calling for guaranteed hours to be limited to eight hours a week or less, arguing that this would ensure the rules focus on workers genuinely undertaking very limited hours.
The reforms form part of the Employment Rights Act 2025. A government consultation on the proposals began in June and closed on Tuesday.
Official analysis suggests the changes could cost employers between £350 million and £2.9 billion a year. The additional costs would come from higher staffing expenses, administrative requirements and potential losses caused by reduced flexibility.
Retail and hospitality businesses are expected to face particular pressure because both sectors have already been dealing with higher employer National Insurance contributions and increases in the minimum wage.
Helen Dickinson, chief executive of the British Retail Consortium, said the government should target exploitation without removing flexible employment opportunities.
UKHospitality chief executive Allen Simpson said hospitality businesses provide employment opportunities across the country but warned that higher costs could reduce the number of jobs available to younger workers.
British Chambers of Commerce director general Shevaun Haviland also said the proposals could damage recruitment and investment, arguing that zero-hours contracts can provide useful flexibility for some workers and businesses.
The Confederation of British Industry said rising employment costs and wider pressures from energy bills, taxation and borrowing were already affecting recruitment decisions.
Research by the Chartered Institute of Personnel and Development found that 65% of employers using zero-hours contracts expect their human resources and management costs to rise under the reforms. About 31% said they could be forced to make redundancies, while 33% expected to increase their use of self-employed contractors or temporary workers.
The government said its aim was to end exploitative arrangements in which workers carry the financial burden of unpredictable hours and income.
A government spokesman said ministers had not yet made final decisions and were consulting businesses and workers to ensure the reforms provide greater income security without creating unintended consequences.
