Zero hours crackdown could cost firms up to £2.9bn a year

Businesses could face costs of up to £2.9bn a year because of a crackdown on zero hours contracts, according to the government's own analysis.

Labour's employment reforms are set to cut the number of hours staff can work before they must be offered guaranteed time.

Official analysis released on Wednesday showed it could cost employers between £350m and £2.9bn, based on the eventual threshold of hours the policy impacts.

Skills Minister Baroness Jacqui Smith said the reforms would ensure workers are "fairly paid", but business groups said the cost to employers was "disproportionate" compared to how much it would help workers.

The government analysis said there were "potential trade-offs" that include more administrative costs and less flexibility for companies, including making it "harder for employers to respond to changes in demand".

At the upper end of its estimate, about £1.2bn in costs would come from businesses who are forced to pay workers compensation for cancelled shifts.

However the central estimate of how much the policy would cost is £1.1 billion.

The overall cost depends on who the policy eventually applies to: if it applies to people working 48 hours a week it will cost companies more.