Zero-hour contract reforms that could heap nearly £3bn in costs on employers are a risk to jobs and youth prospects, trade associations have warned.
Government analysis has suggested the cost of the reforms to employers could range from £350m to £2.9bn a year. The range represents the costs to businesses of moves to provide workers with rights to guaranteed hours, reasonable notice of shifts, and rights to payment for shifts cancelled or changed at short notice.
The analysis argues changes contained in the Employment Rights Act will “increase costs for employers but also generate benefits that will support growth” by improving worker wellbeing, engagement and productivity.
It acknowledges “there are some potential trade-offs” in costs for businesses, and that the impact of the reforms will be concentrated in sectors where demand is variable such as retail and hospitality.
“The scale of these costs raises serious questions about whether the guaranteed hours reforms will actually deliver value for workers, with the cost to employers appearing hugely disproportionate to the benefits for employees,” said BRC CEO Helen Dickinson.
“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.”
She said it could “not come at a worse time” for retailers on top of a £6.5bn increase in employment costs over the past two years thanks to higher National Insurance contributions and minimum wage increases.
“Adding further costs when youth unemployment is soaring risks being a hammer blow to young people’s job prospects, at precisely the time businesses across the country need to be creating more opportunities,” she said.
“The government should focus on tackling genuinely insecure work without punishing responsible businesses or undermining the availability of the flexible jobs that so many workers value.”
Echoing Dickinson, UKHospitality chair Kate Nicholls said: “The eye-watering cost of these reforms comes at the worst possible time for hospitality businesses, arriving on the heels of more than £5bn in additional employment costs in the past two years.
“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.”
Skills minister Jacqui Smith told Sky News: “We will look very carefully at how we implement the changes that we have put in place through our Employment Rights Act.
“But just to remind people why we did that in the first place, that’s to make sure that when people get into work, that will be work that is fairly paid, where they’ve got security, where they can combine it with the responsibilities that they have in their families.
“I don’t think it’s fair for somebody to be on a contract where they literally don’t know whether or not they’re going to be working at all, and yet they’re bound by that contract.
“So, that’s what we want to bring an end to.”
Milo Bussell, consumer analyst at investment bank Cavendish, said: “The Employment Rights Act addresses a genuine problem that too many low-paid workers face scheduling insecurity, with over half of full-time low-paid staff given less than a week’s notice of their hours, and 15% less than 24 hours, according to the Living Wage Foundation.
“But the additional cost pressures lands hardest on hospitality and high-street retail, sectors already absorbing higher employer NICs and minimum wage increases this year.
“Students and casual workers are likely to bear the brunt. Many work part-time or holiday roles because of the level of flexibility it provides. Tighter compliance and cost pressure will make employers more cautious about offering part-time.
“The risk is that a policy aimed at protecting the most insecure workers ends up shrinking the pool of entry-level and flexible jobs those same workers rely on.”
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