Unions have slammed the Government's unwillignness to ban zero-hours contracts, but the move has been welcomed by business leaders, after Business Secretary Vince Cable said they offer "welcome flexibility" for some workers.
Business Secretary Vince Cable said the contracts had a place in the labour market even though there had been evidence of abuse, but said the government was launching a detailed consultation.
That will include the possibility of banning companies from imposing "exclusivity contracts" which offer no guarantee of work and stop people working for another company.
"A growing number of employers and individuals today are using zero hour contracts," Cable said. "While for many people they offer a welcome flexibility to accommodate childcare or top up monthly earnings, for others it is clear that there has been evidence of abuse around this type of employment which can offer limited employment rights and job security.
"We believe they have a place in today's labour market and are not proposing to ban them outright, but we also want to make sure that people are getting a fair deal.
"Our research this summer gave us a much needed insight into both the positive and negative aspects of zero hours contracts. Our consultation will now focus on tackling the key concerns that were raised, such as exclusivity clauses and how to provide workers with more protection.
"We don't think that people should be tied exclusively to one employer if it unfairly stops them from boosting their income when they are not getting enough work to earn a living. We also want to give employees and employers more guidance and advice on these types of employment contracts.
"Employers need flexible workforces and people should have the choice in how they work. But this shouldn't be at the expense of fairness and transparency."
John Wastnage, head of employment at the British Chambers of Commerce, said: "Zero hours contracts are valued by many workers and employers, but there isn't a clear definition of what they are or how they should work.
"We welcome the Government's consultation as an opportunity to ensure best practice, but without jeopardising employment opportunities. Much of the negativity surrounding zero hours contracts misunderstands the vital role they can play in creating jobs.
"For example, they can be beneficial for students, older workers or those with caring duties who don't want to be constrained by a fixed contract, and they allow employers to experiment with new services or markets."
Alexander Ehmann of the Institute of Directors, said: "The IoD is pleased that the Government has recognised the important contribution that zero hours contracts have made in keeping people in employment and offering flexible ways for employers to manage fluctuations in demand.
"This consultation underlines how important a varied and flexible labour market is to our economy, and quite how out of touch those arguing for an indiscriminate ban on this casual form of work were."
TUC general secretary Frances O'Grady said: "The growth of zero hours contracts is one of the reasons why so many hard-working people are fearful for their jobs and struggling to make ends meet, in spite of the recovery.
"But while the Government has identified some of the problems faced by those with zero job security, it's desperately short on solutions to curb the use of these contracts.
"Through the consultation, the TUC and unions will propose tougher action in order to tackle abuse of zero hours contracts, which can leave people not knowing how much they'll be earning from one week to the next."
Mick Rix, national officer of the GMB union, said: "This snails-pace reaction to what is clearly an urgent problem will not bring any Christmas cheer to exploited low paid workers on zero hour contracts and similar contracts offering employment insecurity.
"It is regrettable that the Government is not outlawing the use of zero hour contracts even though it admits there is abuse."
Shadow business secretary Chuka Umunna said: "Under David Cameron the use of zero hours contracts has proliferated, leaving hundreds of thousands of people insecure at work and worried about whether they will be able to put food on the table for their children.
"Ministers have failed to act on this worrying rise in zero hours contracts. "Having spent months saying they will investigate, all that has emerged is a consultation on proposals which do not go far enough to tackle exploitation and bad practice.
"Labour would act to outlaw the exploitative use of zero hours contracts."
Cable said he was "minded" to ban exclusivity contracts, but added it was not a "totally straightforward" argument, pointing to their use by the royal household.
"We discovered, for example, that they operate exclusivity contracts at Buckingham Palace," he told BBC Radio 4's Today.
"When we looked at it it was connected with security and security checking so it's not totally straightforward."
He told the programme: "We are minded to act on exclusivity contracts but we don't believe that zero-hour contracts are bad in themselves."