UK retailers have warned that proposed reforms to zero-hours and low-hours contracts could put jobs at risk after government analysis estimated that the measures could cost UK employers up to £2.9bn a year.
The British Retail Consortium (BRC) said the potential costs were “hugely disproportionate” to the benefits for workers and could make it harder for retailers to create jobs, particularly for younger people.
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The reforms, which form part of the Employment Rights Act 2025, are intended to give qualifying workers greater certainty over their hours and income. They could have a significant impact on retailers, which often adjust staffing levels to match changing customer demand.
Guaranteed-hours reforms could cost employers £2.9bn
Government analysis estimates that the reforms could cost UK employers between £350m and £2.9bn a year, depending on how the rules are designed and which workers qualify.
The government’s indicative central estimate is £1.1bn, while the £2.9bn figure represents the upper-cost scenario.
The proposed rules would give qualifying workers the right to be offered guaranteed hours based on their regular working pattern. They would also provide rights to reasonable notice of shifts and compensation when shifts are cancelled, shortened or moved at short notice.
Compensation for cancelled shifts could account for a significant part of the cost. Government analysis estimates that around £1.2bn of the potential annual bill could result from requirements to compensate workers when shifts are cancelled at short notice.
The Department for Business and Trade is consulting on how the guaranteed-hours rules should operate. It is considering a qualifying threshold of between eight and 20 hours a week.
The government says an eight-hour baseline could reduce the risk of employers moving zero-hours workers onto contracts guaranteeing only minimal hours to avoid the new requirements. A threshold of up to 20 hours could extend greater security to more workers, but would also increase the number of employees covered by the rules.
No final threshold has been set.
BRC chief executive Helen Dickinson questioned whether the potential costs could be justified.
“The scale of these costs raises serious questions about whether the Guaranteed Hours reforms will actually deliver value for workers,” Dickinson said.
The BRC also argues that the government analysis does not capture every cost retailers could face. Businesses may need to make substantial changes to HR and payroll systems to administer the new requirements.
Dickinson said retailers could face “hundreds of millions of pounds” in additional costs to update those systems.
Retailers already face rising employment costs
The BRC’s warning comes as retailers contend with a much broader increase in employment costs.
According to the organisation, UK retailers have faced a £6.5bn rise in employment costs over the past two years, driven by higher employer National Insurance contributions and increases in the National Living Wage.
Retailers also face costs associated with other measures under the Employment Rights Act.
“These costs could not come at a worse time,” Dickinson said, adding that retailers had already been forced to make difficult decisions as employment costs increased.
The potential impact of the guaranteed-hours reforms is particularly significant for retail because staffing requirements can change sharply throughout the year.
Christmas and other seasonal peaks can require additional workers, while students and other part-time employees may value jobs that allow them to work variable hours.
The BRC and other business groups are concerned that a high qualifying threshold could bring more temporary and flexible workers within the scope of the new rules.
The British Chambers of Commerce and Confederation of British Industry have also raised concerns about recruitment, arguing that broader rules could make it harder for businesses to hire students and seasonal workers.
BRC warns reforms could hit youth employment
The potential impact on recruitment is a particular concern for retailers, which provide large numbers of entry-level and part-time jobs.
The BRC said further increases in employment costs risk making it harder for businesses to create opportunities for younger workers.
“Adding further costs when youth unemployment is soaring risks being a hammer blow to young people’s job prospects,” Dickinson said.
The government takes a different view of the potential economic impact.
It argues that greater predictability could improve worker wellbeing, workforce participation and productivity, while giving employees more certainty over their weekly hours and earnings.
The reforms do not amount to a ban on zero-hours contracts or flexible working. Instead, the government says they are intended to address “one-sided flexibility” by giving qualifying workers greater rights over regular hours, shift notice and cancellations.
Employers would be required to offer guaranteed hours where workers meet the qualifying conditions, rather than requiring workers to accept those offers.
For retailers, the final balance between predictable employment and staffing flexibility will depend heavily on the detailed regulations.
TUC challenges £2.9bn cost estimate
Trade unions have challenged business concerns about the potential £2.9bn cost.
The Trades Union Congress (TUC) argues that part of the upper-end estimate assumes employers continue cancelling shifts at short notice, even though discouraging such practices is one of the aims of the legislation.
The TUC also argues that greater security for variable-hours workers could generate wider economic benefits through higher incomes, improved wellbeing, increased workforce participation and productivity.
The organisation estimates that the potential economic benefits could be worth as much as £10bn.
The government has similarly maintained that the reforms can improve job security without removing flexibility from the labour market.
The eventual impact on UK retailers will depend on the regulations adopted following the consultation, particularly the threshold determining which workers qualify for guaranteed-hours offers and the compensation requirements for cancelled or changed shifts.
The BRC wants ministers to distinguish between genuinely insecure employment practices and flexible arrangements that businesses and some workers choose to use.
“The Government should focus on tackling genuinely insecure work without punishing responsible businesses,” Dickinson said, “or undermining the availability of the flexible jobs that so many workers value.”
