The Government is launching a consultation on zero hours contracts but will not ban them because 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.
The 12-week consultation will include the possibility of banning companies from imposing "exclusivity contracts" which offer no guarantee of work and stop people working for another company.Business groups welcomed the announcement, and the decision against a ban, but union leaders said the Government was "desperately short on solutions" to curb the use of zero hours contracts, under which people don't know if they have work from one week to the next.
Mr Cable said: ""A growing number of employers and individuals today are using zero hour contracts.
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.
"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."