Flexibility or fairness? Businesses face £3bn jobs shake-up

Zero-hours ban could cost firms billions

Flexibility or fairness? Businesses face £3bn jobs shake-up

The clock is ticking for one of the biggest workplace reforms in years. The Government's consultation on ending zero-hours contracts closes next week, and the battle lines are firmly drawn. Ministers say the changes will make work fairer and more secure. Businesses warn they could saddle employers with billions in extra costs at a time when many are already struggling to survive.

For small and micro businesses, the stakes are especially high. Sectors such as hospitality, retail, care and logistics rely on flexible staffing to cope with unpredictable demand. If the reforms go ahead, employers fear higher wage bills, more red tape and fewer job opportunities, while supporters argue the changes will deliver greater security, stronger local economies and a fairer world of work.

Zero‑Hours Contract Reforms

The Government’s consultation into banning of Zero Hours contracts, closes next week. In anticipation of the ban going ahead there are several multi-billion figures being bandied about for the total cost of the move to businesses if it were implemented.

The consultation frames these reforms as part of the plan to ‘Make Work Pay’ aiming to end “one‑sided flexibility” while keeping genuine flexibility for workers who want it. The aim is laudable and small businesses want to pay well, but unless work pays for them too, the unintended consequences will kick in.

For small and micro businesses, the impact may well be material, uneven, and sector‑specific. For that reason, it’s not too late to have your say and details of how to respond the consultation can be found here. The closing date for responses is 25th August 2026.

The bill for a ban will be big

A ban on zero‑hours contracts could cost British businesses up to £3bn, according to figures reported by the Telegraph. That number that has sent shockwaves through employers already battling rising costs, weak demand and endless red tape.

However, the government argues the change will make work fairer, more secure and more productive and that ending zero‑hours contracts forces businesses to pay for the flexibility they’ve relied on for years

Five big pressure points

Guaranteed hours mean guaranteed wages. Zero‑hours contracts let employers call staff in only when needed. If they can’t do that, they will have to give workers fixed hours and pay and that will show up in fixed staffing costs. Businesses will lose the ability to “flex” labour costs day‑to‑day and sectors like retail, hospitality, social care and logistics will be badly hit. A ban could also reduce the number of roles for young people starting in the workforce in flexible roles.

Higher employer NICs and pension contributions become part of the equation if workers move to guaranteed contracts, pushing the wage bill for employer up more.  National Insurance, more pension contributions and holiday pay all rise automatically when contracted hours rise.

Zero‑hours contracts allow employers to cover peaks, cut staff during quiet periods and avoid paying for downtime. If that’s banned as a way of working, there needs to be more accurate forecasts about demand and the number of permanent people needed to meet it. The hours must be paid for even when demand dips. That hits hospitality, retail and care hardest, again sectors where many young people get their first experience of work.

When guaranteed hours don’t cover demand employers have to pay for overtime, emergency cover or agency staff. Zero‑hours contracts used to absorb these peaks and troughs. Without them, the cost lands directly on the employer.

Legal, HR and compliance costs: a ban will mean contracts have to be rewritten and the old HR policies go out the window. There will be added costs for changes to payroll systems and training for managers as well as dealing with disputes. All of this adds to the bill for employers and it’s a huge administrative headache, especially for small businesses. It could be another reason why employers reduce roles, to cut bills.

This isn’t just about business

Ministers argue the ban is part of a wider plan to “make work pay” for workers, and that the economic benefits outweigh the cost.

More secure incomes will give people more money to spend and so business will benefit from better off consumers. Workers with guaranteed hours spend, borrow and save more and rely less on the welfare benefit system. This should boost local high streets and economies and local communities.

More stable jobs should also push up productivity. Research shows workers with predictable hours are more loyal, reliable and productive, and less stressed. Businesses benefit from lower turnover and better performance.

Zero‑hours contracts give employers flexibility, but workers carry all the risk. The government argues that flexibility should benefit workers as well as businesses; that they shouldn’t have to wait by the phone or be sent home unpaid, lose income overnight or have to live with constant uncertainty.

Guaranteed hours give people stability, dignity and control. Bosses tend to agree but struggle to pay the added costs especially as costs have risen around 70% in the last 10 years. The government also believes that secure work leads to stronger communities, more tax paid and fewer benefits claims and that worker health is better.

Businesses say a ban removes flexibility that’s essential for the operation of their businesses, and piles on costs during a dangerously fragile economic period.

The Government says the UK has relied on insecure work for too long, and the economy will be stronger when workers have stability.

Many workers say that zero‑hours contracts leave them unable to plan their lives, pay bills or feel secure. Other workers say they need the flexibility so they can cover caring responsibilities.

The cost of a ban

A ban on zero‑hours contracts could cost businesses up to £3bn because it forces employers to pay for the stability they’ve avoided for years.

On the other side of the argument, it could boost productivity, increase spending power, reduce insecurity, make work pay and help build a fairer labour market.

The real question is ‘what will the respondents to the consultation say’, and what will that mean for the rollout of the Government’s proposals? With so many different views on the table, and the businesses with the deepest pockets most able to get their voices heard, it will be interesting to see if the Government manages to get this balance right.

Have your say: https://ditresearch.eu.qualtrics.com/jfe/form/SV_aVtNI2h3zEpVjpQ