Labour’s ‘chaotic’ zero-hour crackdown could cost firms £3bn per year
Labour’s ‘chaotic’ crackdown on zero-hour contracts could cost businesses nearly £3bn every year, though firms have warned the real cost could spiral even higher.
The cost of the new rules, which include offering guaranteed-hour contracts to flexible employees and paying workers for cancelled shifts, has been revealed in a government impact assessment.
The reforms could cost British firms as much as £2.9bn per year, though it said the alleged economic benefits of these policies mean the net average cost will be between £300m and £1.4bn.
The right to guaranteed hours could cost firms as much as £450m per year, while the right to reasonable notice of shifts and rules forcing bosses to pay for shifts cancelled at short-notice could cost up to £1.2bn and £1.3bn per year.
The government’s more conservative “central” costing scenario has priced these new rules at £270m, £640m and £160m respectively, meaning the zero-hours crackdown would most likely cost firms £1.1bn each year.
But the social value of these workers’ rights mean that the new rules will carry a net cost to the economy of up to £1.4bn in the high-end scenario and £800m in the central case.
The Federation of Small Business, a leading trade body, has slammed Andy Burnham’s government for risking the “same old unemployment” as its predecessor if it continues its “chaotic approach to employment reform”.
Labour will set hours-per-week thresholds for claiming these new rights, to determine how many workers will be able to access them.
The level of this threshold will be the “biggest driver” of the scale of cost to businesses, the government said, adding: “The current evidence of policy benefits is strongest at lower thresholds […] while costs increase substantially as thresholds rise.”
If ministers force firms to pay all employees who work up to 48 per week for shifts cancelled at the last minute, this new red tape could cost businesses £1.3bn per year.
‘Eyewatering’ cost of reforms
The government is also set to extend the amount of notice that bosses must give their workers for changes to their rota.
A four-week notice period would cost businesses £1.2bn, while a one-week period would carry a £620m price tag.
While the government has conceded that these workers’ rights could cost firms as much as £2.9bn per year, industry bodies have warned that extra admin could mean this burden spirals higher.
Tina McKenzie, interim chair of the Federation of Small Businesses, said it had been hoping the new Labour government would “follow the Prime Minister’s lead” by starting a “positive conversation” with businesses.
“If the new Government is going to be able to look those seeking work in the eye, it needs to pause these wrong-headed reforms before they damage workplaces, workers, and those out of work,” she said.
Former Chancellor Rachel Reeves had set out plans to cut firms’ “pointless” admin costs by a quarter, or £5.6bn, but industry figures warned that this new red tape will saddle businesses with extra bureaucracy.
“These estimates also only tell part of the story, as retailers will have to fork out hundreds of millions of pounds to update their HR and payroll systems,” said Helen Dickinson, the British Retail Consortium’s chief executive.
“These costs could not come at a worse time,” with retailers already reeling from a £5.6bn hike in employment costs, she added.
Kate Nichols, chief executive of UK Hospitality, hit out at the “eyewatering” cost of the reforms. “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,” she said.
a TUC spokesperson said: “This is an upper estimate of a very wide range and nearly half of this figure is based on the assumption that employers will continue to cancel shifts at short notice.
“The aim of this legislation is to stop this practice and give variable hours workers security and stability – so good employers have nothing to fear.”