Companies could be forced to compensate workers on zero-hours or flexible contracts for cancelled shifts, under government proposals.

The business secretary, Greg Clark, launched a 12-week consultation process on the measures designed to protect those on zero hours or flexible contracts that were laid out in the government’s Good Work Plan, in December. The plan was based on the recommendations made by Tony Blair’s former adviser Matthew Taylor in his review into employment published in July 2017.

The government is also consulting on introducing a “reasonable period of notice” on weekly hours and protection from being penalised for not accepting last-minute shifts, as part of a package of measures to tackle problems associated with flexible working.

Taylor, who was this week appointed as the interim head of the government’s labour market enforcement body, urged the government to ensure that flexibility did not benefit the employer at the expense of the worker.

In a mark of the UK’s increasingly insecure working environment, nearly 40% of UK workers say their hours can vary from week to week and 17% are given no more than a day’s notice when shifts were cancelled. According to a Low Pay Commission study, 1.7 million people said they felt anxious about unexpected changes to their working hours.

The TUC, the umbrella body for British trade unions, welcomed the government’s plans as a “step in the right direction”.

However, Frances O’Grady, the general secretary of the TUC, said the government needed to take firmer action. “Too many workers are treated like disposable labour,” she said. “We need to deal with the root of this problem – the explosion of insecure work. That means banning shady practices like zero-hours contracts.”

Clark, who doesn’t expect to remain in his job when Theresa May steps down next week, said: “These protections will cement the UK’s status as a world-leader in workers’ rights.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

“Innovative entrepreneurs and new business models have opened up a whole new world of working patterns and opportunities, providing people with freedom to decide when and where they work that best suits them.

“It’s vital that workers’ rights keep pace with these changes, reflect the modern working environment and tackle the small number of firms that do not treat their staff fairly.”

Consultation on the latest Good Work Plan measures comes after the government introduced a new right for workers to receive a payslip setting out the number of hours worked and a statement of rights, including entitlement to leave.

• This article was amended on 23 July 2019 to make it clear that the first reference to “the plan” was to the government’s Good Work plan of December 2018 and to correct a reference to the date of Taylor’s report, which was published in July 2017, not last year.