When Seamus Foley took a job on a zero-hours contract at a board games bar in London two years ago, the flexibility it offered was appealing. Now, the deal looks so bad he is prepared to walk out on strike.

“It’s exhausting. You’re constantly living your life on the back foot,” says the employee at Draughts, which has bars in Stratford and Waterloo. There, workers fed up with last-minute rota changes and a lack of basic protections are staging industrial action.

“It feels like all the power is in the hands of the employer,” he says, adding that he feels as though these kinds of contracts are “designed to keep you desperate, hungry and uncertain as to what your next week or two weeks look like.”

Almost 1.2 million workers in the UK are on zero-hours contracts. Despite the preparations being made by Keir Starmer’s government to ban the use of exploitative arrangements, a key manifesto promise, the zero-hours ranks have swelled since Labour’s election victory, rising by more than 100,000 to close to a record high.

Big employers with hundreds of thousands of zero-hours staff between them include McDonald’s, Burger King, Dominos and Mike Ashley’s Frasers Group, and the contracts are still routinely used in social care, hospitality and logistics.

Workers’ rights have been a long-running battle between the government and employers – a row that will intensify this autumn once MPs return from their summer break amid fierce lobbying to water down Labour’s employment rights legislation.

A flashpoint will come in a showdown between ministers and Conservative and Liberal Democrat peers, after the Lords imposed amendments in the final days before the summer recess to drastically curtail the bill.

Justin Madders, the employment minister, said Labour would face down the critics. “We have got a democratic mandate to introduce this bill and the measures. Our starting point is we would continue with it. We’ll see where we end up [with the Lords], but I don’t think at the moment we’ll be looking to resile from things that were clearly in our manifesto.”

Business groups say the cost of hiring staff has soared under Labour after the chancellor Rachel Reeves’s £25bn increase in employer national insurance contributions (NICs) and rise in the “national living wage” were introduced from April.

Firms say too many changes are being made at once when Britain’s economy is weak and the jobs market cooling. Unemployment has risen, partly due to Reeves’s tax rises. Businesses say adding to their costs further would drive joblessness higher, highlighting a £5bn price tag for the workers’ rights policy in the government’s own impact assessment.

Jane Gratton, the deputy director for public policy at the British Chambers of Commerce, says: “You’ll have seen from the figures that the labour market is loosening. If you make it more difficult and costly to employ people, it’s likely to impact on opportunities for people. It will drive business behaviour. We know the government’s own assessment is £5bn. We think that’s probably an underestimate.”

A Federation of Small Businesses survey found 67% of small firms would recruit fewer staff as a result of the bill.

“These measures will just tie businesses in knots and will have real negative impacts on workers too, such as stopping people swapping shifts. It shows what goes wrong when there is such an out-of-touch approach to policymaking,” said Tina McKenzie, the lobby group’s policy chair.

Some lobbyists believe Labour is more likely to cede ground on workers’ rights than on tax and spending before a tough autumn budget. Unlike a costly and embarrassing U-turn on employer NICs, any changes would be fiscally neutral, and it would sit well with Reeves’s wider deregulatory agenda.

However, party insiders say this would underestimate Reeves’ and Starmer’s commitment to stronger workers’ rights. Both are also under pressure to stick to the policy after disappointing many core Labour voters since coming to power.

The bill’s chief proponent, the deputy prime minister, Angela Rayner, said the government wanted to work closely with businesses to make the details of the bill work, including a consultation on the zero-hours ban this autumn, but that changes were vital after years of workplace exploitation.

“Zero-hours contracts are leaving far too many people without the security they deserve – working hard but left waiting for shifts, unsure what their pay will be month to month. We are tackling this head-on,” she said.

Under Labour’s planned changes, zero-hours workers will get the right to a guaranteed-hours contract reflecting their hours over a 12-week reference period. This comes alongside other measures including day-one protections against unfair dismissal and rolling back trade union restrictions.

To overcome business concerns over the breadth of the policy changes, the government has planned to introduce each step gradually, with the ban on zero-hours contracts coming last in late 2027.

However, critics on Labour’s left say this is glacial change and warn that allowing continued use of zero-hours contracts does not constitute a ban and leaves too much power in the hands of bad bosses.

Madders said Labour had sought to strike a balance that recognised how some workers appreciate the flexibility of zero hours, while tipping the balance to stop bad employers forcing staff to stay on those terms against their will.

“What we have done is find a pretty sweet spot where, actually, people who want some certainty and security at work will be able to have that. The bill is done in a way that can make sure that people who do not want to be on a zero-hours contract will not be forced,” he said.

Official figures show 60% of zero-hours workers do not want more hours. About a quarter are in full-time education and more than half are under the age of 35. Those on the contracts work about 19 hours a week on average, compared with 32 hours for other workers. As many as 10% of zero-hours workers have been on such an arrangement with their employer for more than 10 years.

Working conditions have long been an early casualty of straitened economic conditions in Britain. Zero-hours contracts first rose to prominence in the febrile climate after the 2008 financial crisis as employers sought a way to flexibly ramp up their labour capacity to meet slowly returning consumer demand, with the get-out clause that they could reduce staff hours to cut their costs if things turned south again.

Mike Ashley, the billionaire retail tycoon, and his Sports Direct chain became a target for public anger over its use of the contracts and its wider employment practices after a Guardian investigation at its main warehouse in Shirebrook, Derbyshire.

As the contracts became near synonymous with worker exploitation, some firms dropped them, including the pub chain JD Wetherspoon. McDonald’s moved to allow workers to choose a guaranteed-hours contract. However, about 90% of McDonald’s 135,000 UK staff are still on zero-hours terms and the fast food chain has faced accusations of harassment and sexual assault by managers. McDonald’s did not respond to a request for comment.

Unions say warnings over the hit to the jobs market resemble the same arguments used in the 1990s against Labour introducing the minimum wage, which were shown to be false. They highlight that strengthening workers’ rights is a vote winner, backed by most of the electorate, and that more job security is key to boosting workforce productivity.

Tim Sharp, the head of employment rights at the TUC, says: “We’ve had this long experiment with zero hours and other forms of precarious contract for too long. There is no incentive for employers to train and develop their workers and we pay the economic price for that.”

However, analysis by the Resolution Foundation suggests the changes will have neither a massive negative impact nor a huge positive one. Even if the government’s £5bn cost to businesses transpires, it would equate to just 11,000 job losses.

It said: “This is tiny – cutting the employment rate by just 0.02% – in the context of changes that will give millions of workers new protections at work.”

For Foley and his striking co-workers on the picket line at Draughts, efforts to negotiate guaranteed-hours contracts have so far run into a dead end. “Thus far it seems to be something they’re not willing to entertain,” he says.

Represented by the United Voices of the World union, it is the first time the bar worker has been involved in industrial action. He says Draughts’ managers had sought to reassure staff they would be treated fairly regardless of their contracts, but this amounted to very little. “You can’t take a verbal agreement. Ultimately, if we don’t have something written into our contracts, we can’t enforce upon it when it’s breached.”

He added: “I don’t feel like they’ve given us any sort of solid response that isn’t a platitude.” Draughts did not respond to a request for comment.

Despite fearing employers could still “game the system” under Labour’s proposals, Foley said the changes could still be very attractive. “It would definitely be better than what we have now,” he says.