BRC Warns Zero-Hours Reforms Could Cost Retailers £2.9bn

The British Retail Consortium has called on the government to rethink planned zero-hours contract reforms after official analysis put the annual cost to businesses at as much as £2.9bn.

New figures from the Department for Business and Trade show the package – covering guaranteed hours, shift notice and compensation for last-minute cancellations – could cost employers between £350m and £2.9bn a year depending on the final rules. The department's central estimate stands at £1.1bn.

The measures are part of the Employment Rights Act 2025. They target what the government calls “one-sided flexibility” in the labour market.

Under the proposals, qualifying employees would get a right to guaranteed hours based on their regular work pattern. Eligible staff would also be entitled to reasonable notice of shifts and compensation when shifts are cancelled, moved or shortened at short notice. Workers who prefer the current flexibility can reject a guaranteed-hours offer and stay on their existing contract.

The government's own analysis acknowledged that the changes would raise administrative costs, reduce flexibility and make it harder for companies to respond to demand swings, the BRC noted.

Retail is among the industries expected to feel the biggest impact, alongside hospitality, entertainment, support services, education and health and social care. Those sectors rely heavily on variable staffing and short-notice scheduling.

BRC chief executive Helen Dickinson said the scale of the estimated costs raised “serious questions” about whether the reforms would deliver enough benefit to employees to justify the burden on businesses. She warned that the official estimates did not capture the full expense facing retailers, which could have to spend hundreds of millions of pounds updating HR and payroll systems to comply.

Dickinson said the new burden came at a particularly difficult time for the sector. Retailers have already absorbed what the BRC puts at a £6.5bn rise in employment costs over the past two years, driven by higher employer National Insurance contributions and increases to the National Living Wage.

The trade body also warned that further increases to the cost and complexity of hiring could hit young workers hardest by reducing the number of flexible and entry-level roles available. The government's analysis identified 16- to 24-year-olds as one of the groups most likely to be affected, though it argued they also stand to benefit most from greater hour security.

The government maintains the changes will improve worker wellbeing, encourage better workforce planning and boost productivity. Its research found that 53% of people in insecure work said fluctuating income affected their ability to pay for essential expenses, while 58% wanted consistent guaranteed hours matching their normal working patterns.

The department estimates the reforms could result in workers receiving between £5m and £1.2bn a year in payments for cancelled or shortened shifts, depending on the final policy settings. After accounting for monetisable benefits, the overall net cost of the package is modelled at between £300m and £1.4bn a year. Ministers said other potential benefits, including improvements to wellbeing and lower childcare and travel costs, could not be reliably valued.

Dickinson called on ministers to focus on tackling genuinely insecure employment without penalising businesses that use flexible contracts responsibly. Further costs could undermine retailers' ability to create jobs, she said.

The finer details of the reforms have not been settled. A government consultation – covering which workers should qualify and how much notice businesses should provide for shifts – closes on 25 August. The zero-hours provisions have not yet come into effect. The implementation timetable will be confirmed after the consultation and subsequent regulations are finalised.