In the hospitality industry, where a higher than average percentage of lower skilled workforce are transient, on part time contracts and in the younger age bracket; the advent of the increase in the National Minimum Wage (NMW) is having profound impacts on business management.
In the Low Pay Commission Report Spring 2016, it is estimated that in 2016 one in three jobs in hospitality is set to be paid at the minimum wage. In 2015, hospitality had the largest number of minimum wage jobs at 353,000 (24.6% of workers in the sector) rising to 447,000 in 2016 (31.1% of workers in the sector), second only to the retail sector.
How is the hospitality sector reacting to the national minimum wage increase?
From the discussions at The Caterer’s round table it was clear that the hoteliers were not disagreeing with the legislation from a moral, personal point of view; it is more how it is phased in and how the hospitality sector can react to maintain their profitability and competitive edge in the face of rising wage bills (predicted rise of £450m to 2020). Becoming more lean in terms of cost centres is the first port of call for many organisations; such as job cuts, shift pattern changes (hours cuts), procurement practices and skills reviews.
Some holiday park operators may be faced with “compressed differentials” from competitors, when attracting workers within the minimum wage category, as the practice to pay x% above NMW may be reduced each time there is a rise instigated by the government.
Growing revenue and increasing productivity is the other side of the coin, particularly if your holiday park is operating as lean as it can be (post-recession) without negatively affecting customer experience.
Employers who fail to meet legal requirements for paying NMW risk their reputation being damaged, which in a digitally transparent world and competitive sector is incredibly important. The regular “naming and shaming” of companies is published online, without apology by Business Minister Nick Boles: “Our policy of naming and shaming employers who ignore the law means there are consequences for their reputation as well as their wallets.”
Increasing productivity and enhancing revenue streams to combat any rise in payroll
If holiday park operators are already running a finely balanced equation between staff levels and customer service, it may be time to evaluate internal processes, procedures and systems. Is your organisation losing too much time in administrative tasks that could be automated, time that could be diverted to giving the customer a better service?
There is a danger that when one cost centre increases, in the short to medium term, a business makes the equivalent cut elsewhere – i.e. reducing an investment in infrastructure, expansion plans or promotional budget. All will have a negative impact in the longer run, and if your competitors are finding clever ways to mitigate the challenges in labour costs, the damage is done in the eyes of your customer.
Prodware helps holiday park operators review their business management processes as well as implementing future proof ERP software (ParkVision) and helping understand new routes to market, such as social media. Speak to us about how your business can best handle the effects of the national minimum wage.