Zero-Hours Reform Could Cost Employers Up to £2.9 Billion in the UK

One of the flexible employment models used for years by restaurants, pubs, hotels, and retail businesses in the UK is set to change significantly.

The government's reform package for zero-hours and low-hour contracts is estimated to create direct costs for employers of approximately £350 million to £2.9 billion annually. The central estimate in the government analysis is around £1.1 billion.

The Foodservice Equipment Journal highlighted in its news on September 3, 2026, that the hospitality sector is one of the areas most likely to be affected by the new regulations.

However, the issue is not just about the increase in payroll costs.

The main change could be the shift from a shift model where restaurants and hotels call in staff after demand arises to a workforce planning model where they must predict demand earlier.

The reform brings three fundamental rights

According to the official consultation conducted by the UK government in June 2026, three main changes are anticipated under the Employment Rights Act 2025.

Zero-hours or similar low-hour workers will have the right to:

receive guaranteed working hour offers reflecting the hours they regularly work,

learn about their shifts and shift changes with reasonable notice,

receive payment for shifts that are canceled, shortened, or moved at the last minute.

The details of the regulations will be clarified through secondary legislation. According to Acas's update in September 2026, these new rights for zero-hours and low-hour workers are planned to come into effect in 2027.

Therefore, the £2.9 billion figure announced today is not an actual operating cost but an upper scenario that could arise depending on the final design and employer behavior.

What does guaranteed hours mean?

The reform does not simply ban zero-hours contracts outright.

The government's approach is to offer guaranteed hours that reflect the level of hours worked by regularly employed staff over a specific reference period.

Employees may remain in a flexible model in some cases if they wish.

The government has also consulted on what weekly hour level would trigger this right. In the official response given to Parliament in June, it was stated that the preferred range was between 8 and 20 hours per week.

The exact threshold is not yet final.

This detail is important for hospitality.

If an employee appears to have zero hours in their contract but works 20–25 hours every week for months, the new system aims to turn this actual working pattern into a more predictable contract.

Why are restaurants particularly affected?

One of the main issues with the hospitality workforce is the extremely variable demand.

A packed restaurant on a Friday night.

An empty terrace on a rainy Sunday.

A last-minute canceled event.

An unexpectedly busy brunch service.

A conference group's schedule changing a day before.

Due to this fluctuation, businesses have been using models that can quickly increase or decrease staff numbers in response to demand for years.

Zero-hours contracts are one of the tools for this flexibility.

In the new system, canceling a shift at the last minute could create costs for the business.

Therefore, poorly predicted reservations or incorrect rosters could become not just an operational issue but a direct payroll issue.

Where does the £2.9 billion come from?

The option analyses published by the government in August calculate different cost outcomes depending on the design of the reform.

It is noted that the total direct employer cost could range from approximately £350 million to £2.9 billion.

Included in the costs are:

guaranteed hour obligations,

shift notification processes,

cancellation or change payments,

new administrative processes,

and changes to employers' working models.

The Regulatory Policy Committee assessed the government's three separate option analyses regarding guaranteed hours, reasonable shift notification, and last-minute cancellation payments as "fit for purpose" in terms of evidence and methodology.

This rating does not imply whether the policy is good or bad; it merely indicates that the government's cost-impact analysis meets the regulatory assessment standard.

UKHospitality concerned about costs

UKHospitality President Kate Nicholls argues that the government's upper cost estimate comes at a very challenging time for the sector.

According to Nicholls, hospitality businesses have faced additional costs exceeding £5 billion related to employment over the past two years. The sector representative also claims that rising labor costs have limited hiring and that over 100,000 hospitality jobs have been lost.

These figures are from UKHospitality's sector assessment.

The reform should not be interpreted as directly causing 100,000 job losses in the future.

The government's own analysis also acknowledges potential trade-offs such as higher costs, administrative burdens, and reduced ability to respond to changes in demand.

Why is the government reforming despite this?

The employer cost discussion is only one side of the story.

The government is preparing the reform to reduce the type of working pattern it describes as "one-sided flexibility."

The problem is this:

The employee has no guaranteed hours.

However, the employer expects the person to be available when needed.

When a shift is canceled shortly before, the employee can lose planned income.

At the same time, it becomes more challenging to schedule around a second job or childcare.

According to government research, insecure work creates unseen costs for some employees, such as canceled shifts, transportation, and care organization.

The aim of the reform is not to eliminate all flexibility for the business but to prevent the cost of flexibility from resting solely on the employee.

In hospitality, the right solution may not just be fewer staff

The initial reflex from an employer's perspective may be to reduce the number of employees.

However, there is a limit to this in restaurant operations.

Kitchen production.

Service.

Bar.

Housekeeping.

Banquet.

All of these are highly dependent on physical human labor.

If staff is excessively reduced;

service times may increase,

table turnover may decrease,

overtime may rise,

guest satisfaction may decline,

and the workload on existing employees may grow.

Therefore, managing compliance with the new regulations solely through headcount reduction may not be sustainable.

Forecast quality will directly turn into payroll KPI

One of the most significant operational impacts of the reform is here.

The restaurant manager will need to make more accurate forecasts.

Past sales.

Weather conditions.

Number of reservations.

Event calendar.

Hourly traffic.

Delivery orders.

Past shift productivity.

All of these should be used more systematically in staff planning.

For example, if a business cannot accurately predict how many covers it expects between 6:00 PM and 10:00 PM on a Saturday, one of two bad outcomes will occur:

They will call in too many staff and increase labor costs.

Or they will reduce service quality with insufficient staff.

As the option to cancel employees at the last minute becomes more expensive, the economic consequences of forecasting errors will become more apparent.

“Flexible workforce” is not completely disappearing

The current GOV.UK guide clearly states that zero-hours contracts are still legal today and can be used in some situations.

For example;

unexpected demand,

seasonal peaks,

special events,

or short-term staffing needs

can make flexible contracts functional.

However, even in its current guidance, the government states that employers should notify shifts as early as possible and avoid last-minute cancellations.

The new law will make some of these good practices legal rights.

Why should this be monitored for Turkey?

The zero-hours model in the UK cannot be directly compared with Turkey's labor law and contract system.

Therefore, this reform should not be directly translated into legislation for Turkey.

However, the discussion is universal in terms of hospitality management:

How much income and shift security can be provided to employees when demand is variable?

In Turkey, hotels, restaurants, and event businesses also face similar operational flexibility issues through:

seasonal staff,

part-time work,

extra staff,

banquet teams,

and daily changing shifts.

The UK example shows how quickly systems that establish flexibility solely as a cheap labor tool can turn into a cost problem when legislation changes.

Stafflink's view

In our opinion, the most important message of the UK reform for the hospitality sector is not the upper cost estimate of £2.9 billion.

The cost of poor shift planning is becoming more visible.

Today, when a restaurant calls in too many staff and sends them home two hours later, the business can pass part of the operational error onto the employee.

The new model aims to leave more of this cost with the business.

This could provide employees with greater income predictability.

For the business, it may necessitate better forecasting, more accurate rosters, and more disciplined capacity planning.

Therefore, the real question for hospitality is not "Will we be able to use flexible staff?" but rather:

How will we manage demand flexibility without completely eliminating employee security?

The new rights planned to come into effect in 2027 will directly turn the answer to this question into a part of the business model.