Beyond the balance sheet

What you need to achieve greater staff productivity

Matthew Wyatt 18/3/2019 3 minute read

Matthew Wyatt FCA on labour shortages and the need for training to improve staff productivity in the hospitality trade.

It's a truism, but just as every army marches on its stomach, so the hospitality industry survives on the competency and motivation of its workforce. Being a service industry, the trade depends on the quality of its people to provide an experience that meets and/or exceeds customer expectations. Brexit simply brings this fundamental principal into sharper focus.

Find the funds to invest in staff training and productivity

Reliance on migrant workers

For the last 20+ years, the hospitality trade has been dependent on migrants to the extent that over 60% of hospitality workers in London are now non-British. Even outside the capital, migrant workers are said to represent well over 30% of any establishment's workforce. In total, around 700,000 migrants work in the industry.

It's impossible to say at present, what limits will be placed on immigration post-Brexit, assuming Brexit takes some form and actually happens. The government acknowledges the need for a limited number however, no figure has been agreed and if one is provided it's unlikely to satisfy the industry's stated requirement.

The Brexit fallout

The consequence of Brexit is that labour shortages, already acute, will likely get worse. There will be fewer migrant workers, thereby reducing the supply of labour to the industry. Consequently wage costs, which have been rising of late due to the National Living Wage, will get steeper in an employee driven market that's close to full employment.

Infographic: Where Labor Productivity Is Highest | Statista

Smart operators likely need to commence planning for this now rather than run the risk of being overwhelmed should the UK's exit from the EU materialise.

Solutions to a limited source of labour

The obvious answer is for operators to recruit and retain more British born workers in the lead up to Brexit. This is something the government subscribes to. Alas, it's not as simple as that. The industry is rife with stories of young people not turning up for job interviews or, not turning up to work having got the job.

Factor in the hospitality trade's history of poor wages, long and unsocial work hours as well as challenging working conditions and it's not hard to see why parents wouldn't aspire for their children to seek a career in the sector.

Things are no doubt improving but we still see operators being convicted for paying below the Living Wage Level. Such episodes can't help the image of hospitality as a desirable trade in which to make a living.

Training staff holds the answer

The practical solution could be far higher levels of training. The current development of the much criticised apprenticeship levy appears a botched opportunity which ministers aren't yet acknowledging. The £3m payroll limit simply excludes 80-90% of the hospitality industry workforce.

Employers who do train, gain no benefit form the levy in terms of a reduction in their National Insurance (NI) bill. Yet, done differently that could be a real incentive. Training takes time and money, probably about 1% of turnover in a good organisation. It's an investment for the future and done well, encourages employee retention

Training is an essential activity in your strategic plans and budget because it is the key to improving productivity. It equips your staff with the knowledge and skills to work smarter, to do things in a more timely manner, to re-engineer menus and, to up-sell. These are the key components to improving profitability. 

Perhaps reliance on EU migrant labour became too easy over the years. There was an abundance of supply at a relatively cheap price. Employers didn't have to worry about training and retention, there were always plenty of people available to fill any potential vacancies. Training took a back seat.

Assuming Brexit takes shape, a wise objective for employers might be to make best use of the staff you currently employ. Planned, continuous and persistent training will be the keys to achieving more with less. 

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The content of this post is up to date and relevant as at 18/03/2019.

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