Skills minister Baroness Jacqui Smith has defended the government’s proposed ban on exploitative zero-hour contracts, despite official estimates that the changes could cost employers up to £2.9bn a year. The policy is intended to give workers more predictable hours and earnings, particularly when shifts are cancelled or changed at short notice, but businesses warn it could affect hiring and add substantial administrative costs.

The government is consulting on the hours threshold for the reforms, with a preferred range of eight to 20 hours a week, although 48 hours is also being considered. Its analysis estimates direct employer costs of £350m to £2.9bn annually, with a central estimate of £1.1bn, while payments to workers for disrupted shifts could total £5m to £1.2bn. Retail and business groups criticised the likely impact, whereas unions argued that improved security and wellbeing would produce wider economic benefits.