UK businesses have warned that government plans to strengthen protections for workers on zero-hours and similar contracts risk increasing employment costs and discouraging recruitment, following the publication of new research into the proposed reforms.

The British Chambers of Commerce said the government's latest analysis added to concerns among small and medium-sized businesses about the cumulative cost of employment regulation.

Under the Employment Rights Act 2025, qualifying workers will gain a right to guaranteed hours reflecting the hours they regularly work during a reference period. Workers will also be entitled to reasonable notice of shifts and changes to them, as well as payments when shifts are cancelled, curtailed or moved at short notice. The government intends broadly equivalent protections to apply to qualifying agency workers.

The government has previously indicated that the reference period for calculating guaranteed hours is expected to be 12 weeks. Workers will not be forced to accept the guaranteed-hours contract and will be able to remain on zero-hours arrangements if they prefer.

Ministers argue the changes will address "one-sided flexibility", giving workers greater certainty over their income and allowing them to plan commitments such as childcare. The measures have yet to come into force, with details being determined following consultation. The government's latest implementation timetable says the rights to guaranteed hours, reasonable notice and short-notice payments will be introduced in 2027, with precise timing to be confirmed.

The BCC argues that the additional obligations could reduce businesses' willingness to recruit, particularly among smaller employers already facing higher labour costs.

Kate Shoesmith, director of policy at the BCC, described the estimated additional cost as a "further hammer blow" for companies struggling with rising expenses.

"SMEs have repeatedly raised concerns on the potential impact of these changes on recruitment, flexibility and business confidence," she said.

Shoesmith also criticised the timing of the government's latest research, arguing that its publication late in the consultation process limited businesses' ability to scrutinise the findings.

The BCC is calling for the consultation period to be extended and for further negotiations between government, employers and trade unions over how the new rights will operate in practice.

The government says the reforms are intended to provide greater security and predictability without eliminating flexible employment, with workers remaining able to choose zero-hours arrangements where these suit their circumstances.