Hospitality is specifically identified as one of the sectors likely to be most affected, with the Government acknowledging in the 12-page document that the reforms will increase administrative costs and reduce flexibility for employers.
The Government has been proposing reforms to zero-hours contracts since 2024, when they formed part of the Employment Rights Bill.
They subsequently became part of the Employment Rights Act 2025, which received Royal Assent late last year.
The Act establishes three new rights, but they have yet to come into force with much of the practical detail still unclear.
The measures include a right to guaranteed hours, which would require qualifying workers on zero-hours or low-hours contracts to be offered a contract reflecting the hours they regularly work over a reference period.
The Government currently favours an initial 12-week reference period, although workers would be able to turn down the offer and remain on zero hours if they wanted.
Employers would also have to give eligible workers reasonable advance notice of shifts and changes to them, although exactly how much notice will be considered reasonable has yet to be fixed.
A third measure would require employers to compensate eligible workers when shifts are cancelled, moved or cut short at short notice.
Under the Government’s indicative central scenario, the direct cost to employers is estimated at £1.1bn a year.
The eventual cost will depend on decisions including which workers qualify, how much notice employers must provide and the level of compensation required for cancelled or changed shifts.
The modelling document explores different scenarios. Under the Government’s indicative central scenario – essentially its best estimate – the direct cost to employers is put at £1.1bn a year.
“The eyewatering cost of these reforms comes at the worst possible time for hospitality businesses, arriving on the heels of more than £5 billion in additional employment costs in the past two years," says Kate Nicholls, chair of UKHospitality.
“More than 100,000 jobs have already been lost in hospitality as a result and the extraordinarily high cost of employment continues to restrict job opportunities, particularly for young people. This is on top of hospitality being disproportionately hit by business rates and our high rate of VAT.
“The Government should be incentivising employment in hospitality, as a sector that employs the most young people, most part-time workers and the most non-graduates.
“Instead, these reforms add yet more cost, at a scale that far outweighs the cost benefits for employees.
“It’s critical the Government works with sectors like hospitality to reduce the cost of employing people and incentivise employment, rather than increasing costs and risking further lost job opportunities.”