New rights for gig workers are set to be introduced next year. Eder PaisanEmployers in certain sectors will have been concerned to read reports from the UK government that the costs of promised reforms to “zero hours contracts” under the Employment Rights Act 2025 may be anything up to £2.9 billion.The changes, due to be implemented in early 2027, are designed to redress what are seen as “one-sided” working arrangements under which workers bear all the financial risk of fluctuations in demand for their labour.In December 2025, the number of people working under zero hours contracts as their only or main employment was 1.23 million, with young workers and all workers in the retail and hospitality sectors being disproportionately represented in those figures.The term “zero hours contract” first appeared in academic literature in 1997, but even then, it was still seen as a shorthand description for a collection of employment practices that had been developing from the 1980s onward. The term was not used or defined in UK legislation until 2015. The use of zero hours contracts expanded significantly after 2008, as businesses sought flexible ways to manage employment arrangements in the aftermath of the global financial crisis. The flexibility offered to both employers and workers to plan for fluctuations in demand for and supply of labour is still seen as the primary advantage of zero hours contracts.Controversial from the startZero hours contracts have been controversial from the outset. Worker representatives view “flexibility” as synonymous with “exploitation” of vulnerable and low-income workers, who are said to be disadvantaged by the lack of job security and guaranteed stable income levels. They bear the cost of last-minute changes or cancellations of shifts. The changes in the Employment Rights Act 2025 represent a watering down of the 2024 Labour general election manifesto pledge to “ban” zero hours contracts. But nevertheless, the new statutory provisions represent the most radical change to this form of working arrangement since its inception.The provisions are mindbogglingly complex, and the fine details are still to be worked out through ministerial regulation. The main changes to zero hours contracts are the introduction of:a duty on employers to offer guaranteed hours to workers, based on the average number of hours the worker regularly works over a “reference period” – yet to be defined, but there is a general view that this may be 12 weeksa duty on employers to give “reasonable” notice of shifts and shift changes or cancellations, with compensatory payments to be made to workers in the absence of such noticea right for workers not to suffer detriment or be dismissed for accepting or rejecting an offer of guaranteed hours, with any dismissal primarily for this reason being deemed automatically unfairThe duty to offer guaranteed hours would only apply to workers on contracts where the existing contractual hours were below a (yet to be decided) threshold. Similarly, there would be no obligation to offer guaranteed hours to workers on short-term contracts which were shorter than the reference period. It must also be borne in mind that workers who are content with the zero hours contracts arrangement are under no obligation to accept an employer’s offer. Many workers in hospitality are employed on zero hours contracts. BearFotos It is difficult to judge whether the costs estimate provided by the government is accurate in the absence of clear information on how notions of threshold hours, reference periods and reasonable notice are defined and measured. The higher the number of threshold hours – the government has indicated that this could be anywhere between 8-20 hours per week – the greater will be the costs to employers of the duty to offer guaranteed hours of at least that number.Attempts to avoid triggering the duty by agreeing contractual hours just above the threshold are likely to backfire if the threshold is set at a level that is unsustainable during quiet periods of work. Employers will need to exercise caution when identifying the reference period, as calculating regular hours over a busy period may result in guaranteed hours that are unaffordable during the quieter periods that follow.The use of contracts which are of shorter duration than the reference period may represent a cost saving, but this may be outweighed by the cost of having to prove that the use of such a contract was reasonable.Payments of salary or compensation for last minute changes to or cancellations of shifts is likely to represent a significant cost to employers, but this is likely to be borne disproportionately by employers in sectors where such events are common but unpredictable.Unwanted costsFor businesses which currently use zero hours contracts, some costs, such as the administrative costs of calculating regular hours of workers and the need to update payroll systems, are going to be inevitable. Other potential costs, which may not be so obvious, could include termination payments to workers by employers unable to sustain current workforce levels, or legal fees to explain the impact of the changes.The statutory changes will impose additional unwanted costs on employers. How much those costs are likely to be can only be guesswork in the absence of further government regulation.Employers will have to weigh up the continued advantages of flexibility against these additional costs in deciding whether zero hours contracts still meet the requirements of their business models.This is likely to produce a different answer in different sectors of the economy. The changes also raise the question whether they will achieve the certainty of work hours and stable incomes for workers when the cost to employers may be too much to be sustainable.Andrew Noble is affiliated with the University and College Union.