Rapid grocery delivery firms are preparing to move hundreds of couriers paid by the hour on to insecure gig-economy contracts as the threat of tougher regulations has receded, industry sources have warned.

Ministers have failed to bring in a modern employment bill with protections for gig-economy workers, despite promising to introduce new legislation at least 20 times since reforms were first mentioned in the Queen’s speech in 2019.

Now some on-demand grocery businesses, which are firms that aim to deliver groceries within 15 minutes, are understood to be considering terminating the contracts of couriers entitled to minimum hourly rates and paid holiday and instead offering them self-employed contracts, where they will be paid per drop-off.

Quick-commerce consultant Quaid Combstock, who once headed delivery operations for the former on-demand grocer Jiffy, said industry executives no longer feared tougher employment laws, which would have forced them to take on drivers as workers rather than independent contractors.

“One of the largest firms in the sector is planning to move back into the gig economy because it is cheaper to pay people a fixed price for each delivery than by the hour,” he said. “It’s all about cost savings. The industry opinion is that the government is not going to intervene, so why not go for the cheaper option.”

He said the company had already stopped offering contracts with guaranteed hourly rates. “Their next move will be to terminate existing contracts and offer people gig contracts if they wish to apply. I understand it will be some time in the very near future … in the next two to three months.”

The Observer spoke to some of the on-demand firms, which confirmed that they were re-evaluating worker contracts.

Couriers in the troubled sector, which has seen a recent wave of closures and acquisitions after expanding fast during the pandemic, are worried about a return to the gig economy during a cost of living crisis. Ian Morrison, who has been a courier for five years, said that guaranteed hourly rates gave workers peace of mind on days when there were fewer jobs. “On a quiet day you’re just waiting, losing money. It’s a real struggle,” he said.

In the past, he has been forced to claim universal credit to cover his living costs: “It’s inhumane. No one should be out on the road for long hours and get below the minimum wage.”

He now works for a rapid grocery firm that provides couriers with vehicles and pays them by the hour. “It would be devastating if they were to move us on to a gig-economy model,” he said. “Having that sense of security on quiet days is so important. It gives us a little bit of peace of mind. You know how much you will be earning.”

These warnings come after Just Eat, which has expanded into the on-demand grocery market, announced last month it was laying off 1,700 workers in the UK and reverting to a gig-economy model. The takeaway company made the move despite its chief executive, Jitse Groen, claiming two years ago that gig work had led to the most precarious working conditions in Europe for 100 years.

Combstock said the industry wanted a level playing field. “For the last decade, we have been operating in extreme ambiguity because the laws are so outdated. It is the epic of all epic grey areas. And quite frankly, we’d rather be told where we stand, even if it doesn’t suit our agenda, so we know we’re not going to get sued,” he said.

The appeal of the gig-economy model appeared to be waning after the UK supreme court found that Uber drivers should be classed as workers. But the ruling, which does not bind other employers, has not been followed by new protections or tougher enforcement in the gig economy.

Alex Marshall, president of the Independent Workers’ Union of Great Britain, said companies had been given the green light to tear up workers’ rights: “Companies that had adopted more ethical business models are reverting to the hyper-exploitative gig-economy model after ministers failed to come up with new laws which give workers the rights and flexibility they desperately need.”

A government spokesperson said: “The government is backing six private members’ bills to deliver on our commitments on workers’ rights, including easier access to flexible working and a right to request a more predictable contract.”