PolicyLens

Liberal Democrats - Labour market

Require zero-hours pay premium

Require a 20 percent higher minimum wage for zero-hours workers at normal times.

Last updated: May 2026.

Read the policy-specific methodology note

Policy baseline

The manifesto proposes a 20 percent higher minimum wage for zero-hours workers outside irregular-hours needs. Fiscal effects are indirect.

  • Targets workers on zero-hours contracts.
  • Employers may convert, cut hours or raise prices.
  • Tax receipts rise only if hours remain.

Core trade-offs

The direct beneficiaries are zero-hours workers retaining hours. The costs fall mainly on employers and consumers in flexible sectors. The main economic question is marginal hours and hiring may fall.

  • Zero-hours workers retaining hours gain most directly.
  • Costs fall mainly on employers and consumers in flexible sectors.
  • Key risk: marginal hours and hiring may fall.

Fiscal impact by 2028-29

-GBP 0.3bn to +GBP 1.5bn. Central estimate: +GBP 0.2bn.

  • Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
  • Main channel is the scored tax, spending or delivery change.
  • Offsets depend on tax receipts, behaviour and pass-through.
  • Range reflects uncertain implementation and economic response.
  • This is not an official costing.

Economic impact by 2028-29

  • Jobs: Higher expected labour costs can reduce marginal hiring and contracting.
  • Wages: Protected workers gain security or pay; some costs shift through lower hours or prices.
  • Prices: Labour-intensive sectors may pass costs to consumers.
  • GDP / productivity: Likely mildly negative if rules reduce flexibility; benefits depend on enforcement and productivity.

Assessment

This is a real trade-off, not a free gain. Zero-hours workers retaining hours benefit, while employers and consumers in flexible sectors bear most costs. Overall output depends on behaviour, capacity and pass-through.

Confidence: Medium-low. Higher on the policy target and fiscal channel; lower on behaviour, pass-through and economy-wide effects.

Main risks

  • Hiring risk: Employers may reduce marginal hiring, hours or outsourcing flexibility.
  • Tribunal pressure: Rights without enforcement capacity create delay and uncertainty.
  • Small-firm burden: Compliance costs are heavier for small employers.

Safeguards

  • Phase rights with tribunal capacity.
  • Offer small-firm compliance guidance.
  • Monitor hiring, hours and contracting.

Academic evidence

Gruber, Journal of Public Economics, 1997

Payroll tax incidence

Employer payroll taxes are often shifted partly to workers through wages, but incidence depends on institutions and time.

Important for employer NIC and labour-cost policies.

The Incidence of Payroll Taxation (1997)

Autor, Donohue and Schwab, Review of Economic Studies, 2006

Employment protection costs

Wrongful-discharge protections increased firing costs and affected firm employment decisions.

Relevant to worker-rights reforms.

The Costs of Wrongful-Discharge Laws (2006)

UK government evidence

Sources

Other Liberal Democrats policies

PolicyLens estimates are illustrative and should not be treated as official costings.