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United we stand……..

The pandemic

To our dear hospitality colleagues

The last 18 months have been an unimaginable nightmare. We’ve been forced to close, trade restricted and now we find ourselves in what almost feels like the cruellest dream of all; we’re open with strong consumer confidence but we’re all struggling to recruit enough team to service demand.

Record job vacancies are being posted up and down the country. Venues are reducing hours, closing days, reducing choices, all to continue trading, often at a fraction of pre pandemic levels.

How do we solve this problem?

EU citizens looking for work in hospitality have fallen by 41% since Brexit. Add the 1.3 million non-UK workers that are estimated to have left Britain since 2019, with the vast majority having previously worked in hospitality and care, it’s not difficult to see where some of the problem lies.

Furlough, we thought was our saviour. It has turned out to be the genie box. We’ve given a largely night time service sector the taste of a 9-5 lifestyle and the consequences have been vast numbers leaving the industry. There are easier jobs to do than serve food and drink to a very demanding public! Work life balance desires are stronger than ever, I get it. But when your industry functions when the public wants to party, it’s a juxtaposition that there is no solution for. We work when the public plays. Four day weeks, shorter shifts, flexible working is all workable but only if we have enough workforce to share the tasks.

Hospitality is being left behind in the evolution of employment rights. The Scottish Government is currently championing a move to a 4 day working week. Without on tap skilled labour this is close to impossible for our sector. Or are we missing a trick? If we are, please share as we can’t figure it out with the current status quo.

The pandemic, whether you’ve been affected or not, is still very much with us, added to the Brexit and Furlough mix and the challenges become even more acute. Team isolating and general fatigue kicking in where colleagues are working extra hours to cover for those off sick, is making it tougher than ever. I know I’m getting older but I’ve got even more determination to work through this and fix this. We have to, we have no alternative.

I’ve some thoughts but we need help.

Re-joining Europe doesn’t seem to be an option but a change in immigration policy would be most welcome. Rent and rates structure will probably never change. But something needs to!

First and most importantly VAT must be reduced permanently. The end of September will see VAT rising from 5% to 12.5% on food with the 20% rate returning next year. With the trials of the previous 18 months it may be the final straw for many businesses.

There is much talk of inflation. The supply chain is struggling and delivery of some basic products like milk and butter is proving impossible. Prices will increase but again it’s HMRC that will benefit.

The next issue is probably the most controversial. Every business model is different, if the same structure exists in other hospitality businesses, as in ours, we could be bold and put our heads above the parapet and start solving part of the problem. Based on our model we have always seen this as part of the solution, but we can’t do it on our own. TIPs.

Hospitality has a two tier pricing system that sits in another era. TO INSURE PROMPT SERVICE (TIPS). Founded way back to the middle ages with the caste system or in more recent Victorian time when the Maitre D’s were given that cash handshake to receive preferential treatment before the guests even sat down. Today we’ve moved to tips being paid at the end of service. As an industry we should be delivering the best service always, to everyone equally both before and after dining. There shouldn’t need to be an “extra” payment, it should simply be a fair payment. You don’t tip your accountant do you!?

In line with the wider industry we add an optional 10% gratuity that is shared equally with all the team through a tronc (Victor and I excluded).

I am not advocating removing this tip’s charge or income from our team, I’m just advocating a change in how it’s charged and how the income is distributed.

VAT in hospitality must be reduced.
Prices need to reflect the “value” that the public is already prepared to pay for the goods and service. Menu price plus tip income need to show the fair “value” price with no added charge. Statistics show that the majority of diners leave generous tips, 7% is believed to be the average but with so much cash tips being unaccounted for it’s hard to know. Visit Britain advises 10 – 15% should be paid. With many venues opting to add a discretionary gratuity (subject to basic rate tax and NI) or a service charge (which is subject to VAT, tax and NI). The price is therefore a list price plus an extra. Lets just make it the “value” price.

If the above were to happen we could free up income to redistribute to the team. In turn become a RLW employer and there would be adequate capacity to increase rates for the skilled team to support a more attractive career choice which would bring more labour to the sector.

The government would still get income but through income tax and NI rather than through VAT. VAT income would also increase because we’d be able to trade better which would support higher sales.

A strong, buoyant hospitality sector that is adequately resourced would then support GDP growth plus the wider economy of retail, tourism and our supply chain. It’s a no brainer.

I want our sector to be a career of choice. Being a RLW industry is part of the problem but this does not solve our recruitment challenges. If we pay RLW, without a change in the model, all it does is close the gap between industry professionals who are choosing hospitality for a career and the transient fillers that we rely on to trade but don’t stay long term. This leaves very little capacity to reward and invest in the essential business skills that identify our sector, especially when the difference is penalised with higher tax rates kicking in at £40,000. The monthly net pay difference in some cases between transient team and long term industry committed professionals is nominal. TIPS are still in the mix and they can be significant, but good businesses have no control over this income.

Hospitality contributes significantly to GDP. Over 12% at pre pandemic rates. To get back to this, with a post Brexit and post Furlough work force we need change.

Hospitality can be part of the solution but we need to be bold and we need the government to help. Let’s move our sector to the career focused businesses that we know we are. We are great at attracting young people, we’re great at training and sharing industry knowledge, we are great at supporting our wider community. Let’s be great at keeping a team because we are able to invest and motivate long term. We can solve this.

If anyone has a better solution, please let me know. I’m open to anything!


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