The Office for National Statistics is changing the way it calculates the number of workers on zero-hours contracts after admitting that its current figures are likely to be too low.

The government agency has already been forced to increase its previous estimate by 25% to 250,000 workers after the Guardian revealed that several high profile employers, including Sports Direct, McDonald's and Buckingham Palace, were using the contracts for a large majority of their staff.

Politicians and charities welcomed the changes, warning that the new data would probably see the number of people officially on zero-hours contracts soar, and called for the government to tackle the issue.

The Labour MP for Corby and East Northamptonshire, Andy Sawford, wrote to the ONS this month asking it to change the way it calculates its data after a survey by the Chartered Institute of Personnel and Development (CIPD) estimated that 1 million people were employed on the contracts, which guarantee no set hours.

In a letter seen by the Guardian, the ONS's director general, Glen Watson, wrote to Sawford admitting that the CIPD survey and the ONS survey use different methods that lead to different results. He added: "To address this, I plan to add some questions on zero-hours contracts to an existing large-scale ONS business survey, so as to obtain robust data directly from the employers. This will commence in autumn 2013 and the new questions will be asked on a quarterly basis thereafter. We plan to publish results in early 2014.

"To ensure that users' needs are met, the ONS will undertake a brief consultation exercise in September, to clarify the data requirements."

The ONS currently calculates the number of people on zero-hours contracts by asking workers in its labour force survey. However, this has been criticised for producing an underestimate, because some workers may not know what kind of contract they are on. A letter sent to shadow business secretary Chuka Umunna from Sir Andrew Dilnot, chair of the ONS's parent body, the UK Statistics Authority, said: "Our view is that any estimate based on responses from individuals to a question that uses a possibly unfamiliar term such as 'zero-hours' may be subject to the risk of an undercount."

Sawford welcomed the move by the ONS, and said the government must now take the issue more seriously. He said: "I'm pleased the ONS are finally going to look at this. They have dragged their heels for some time, and I'm glad they have responded and confirmed the way they focused was wrong. What I expect it would show is that 1 million are on zero-hours contracts, but it could even exceed that. The figures from the ONS are very important because they are seen as 'official'. Because they have underestimated them so significantly for so long the government may finally recognise how big the problem is. If the ONS is no longer confident to use its own figures then the government shouldn't use them either."

Vince Cable, the business secretary, has attempted to play down the level of workers on zero-hours contracts, referring to the ONS figures, although he did admit the problem might be bigger than first thought.

He has also suggested that there could be legislative changes and has ordered a review by three officials of the issue over the summer.

Sawford added: "What it should mean now is, when the ONS figures confirm there are many more people on these contracts, that Vince looks again and puts some proper resources into [the] review – because everyone's expectation is it will get nowhere."

The Guardian has already identified nearly 200,000 workers on zero-hours contracts across the private sector, including staff at McDonald's, Burger King, JD Wetherspoon, Sports Direct, Cineworld and Boots. The government has also admitted that 307,000 workers in the care system are on zero-hours contracts, which leave staff unable to guarantee their income each week, making it difficult to get mortgages or loans.

Mark Beatson, chief economist at the CIPD, welcomed the ONS's decision. He said: "It is always a challenge for official statistics to keep pace with the ever-changing nature of work and working lives. We're pleased that the ONS are taking this step to help understand and track an important but ambiguous aspect of the modern labour market."

Vidhya Alakeson, deputy chief executive of the Resolution Foundation, which has been researching the affects of zero-hours contracts on workers, said: "We have been struggling to try and get an accurate estimate for how many people this affects, especially when the difference between the ONS estimate and CIPD estimate is so vast. It's a good move because many employees we spoke to found that many didn't know that they were on zero-hours contracts.We would assume that the number would be far higher."