Zero-hours reforms: the true cost for employers is starting to emerge
The Employment Rights Act 2025 will make significant changes to the way employers engage staff on zero and low hours contracts.
18.08.2026
The Department for Business and Trade (DBT) has published its analysis on reforms to zero hours contracts alongside its consultation on the changes it intends to make. The figures provide employers with an early indication of the potential impact of the changes.
The potential costs are huge. Depending on the final rules, direct employer costs are estimated at between £350 million and £2.9 billion a year, with a central estimate of £1.1 billion per year. And that's before many of the practical details have been finalised.
According to the government analysis, these costs are likely to arise from:
- offering guaranteed hours to eligible workers
- providing greater notice of shifts
- paying compensation where shifts are cancelled or changed at short notice; and
- increased administration and workforce planning requirements.
The government has recently updated its ERA roadmap. It indicates that these reforms will take effect in 2027. Whether that remains realistic will depend on how the government responds to the feedback it receives from the consultation. We'll keep you informed.
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