For many in the UK’s hospitality industry, Brexit will define the end of an era for cheap front-line labour. However, regardless of the fact we remain uncertain about the details of how (and when) it will unfold, it seems the sheer anxiety of Brexit’s arrival has triggered the end of that era already.
Currently, 15% of the 4.5 million people in the UK’s hospitality industry are EU nationals and research shows businesses can expect to lose up to 30% of those workers once Brexit hits. Needless to say, this number is terrifying for employers, who must figure out ways to replace those workers while keeping their businesses afloat. Even before Brexit arrives and forces this large pool of workers to leave the UK, businesses are taking pre-emptive measures to fill the gap – and it’s already driving up costs across the industry.
First comes the upfront costs of attracting and hiring local talent who, according to research by hospitality recruiter The Change Group, expect an average 18% higher salary than their EU counterparts. Managing this spike in labour costs while still turning a profit forces companies to shift their labour strategies to focus on “quality over quantity” when it comes to staff – a strategy that is in itself expensive.
On top of this higher salary baseline, it has kick-started a cycle in which companies are forced to push up wages even higher to make their job more desirable compared with competitors or risk losing the ability to attract long-term local staff. In fact, data from independent job board CV-Library reveals average salaries across the UK have reached a five-year high and salaries in hospitality specifically will continue to rise by 10% a year as a result of Brexit-related staffing changes.
It also means companies are having to increasingly invest in ways to retain the talent they have or plan to have in the future. Many businesses have started to buy technology and systems to help reduce staff turnover, including tools for better training and development, fostering a more engaging workplace culture, and strengthening transparency and trust from management. Of course all this costs money and significantly hits profits. Earlier this year JD Wetherspoon reported profits down 10% despite consistently strong sales growth as its revenues weren’t translating into profits because of higher costs for retaining staff.
Many job-seekers have realised this is a great time to apply for hospitality roles as they are likely to receive higher pay, better benefits and a more engaging workplace culture than they would have enjoyed pre-Brexit. In fact, applications for hospitality roles have increased almost 50% month-on-month this year as people take advantage of this rise in pay. On top of that, opportunities are becoming endless as employers open up as many roles as possible. Travelodge, which announced it aims to recruit 3,000 students this summer in an attempt to be “Brexit ready”, is just one example.
This means the beginning of the end for cheap front-line labour is already well under way. As hospitality employers, simply dwelling on the fears of high costs will do little to prepare you for the inevitable. As competitors begin to get a head start, falling behind in strengthening your workplace culture and boosting methods for retention could cost you the success of your business. The best course of action would be to accept these new costs and focus on the strategy shift. At the end of the day, it means being as efficient and lean as possible with your staff and operations – why not try to view that as a silver lining to all this chaos?
Source: Propel Newsletter.