Mar 2015 Financial News
Business exec on labour shortage in T&T: High turnover means lower revenue
Mar 19, 2015
The labour shortage that businesses face in T&T will continue to hurt the economy through higher inflation and lower productivity, says Charles Pashley, the managing director of Prestige Holdings, the parent company for the T&T franchises of KFC, Pizza Hut, Subway, and TGI Fridays brands.
“The food inflation is at 14.8 per cent and if there is limited labour supply what is going to happen when we try to open more restaurants or anyone else tries to manufacture more in their manufacturing plant? Naturally, wage structures are going to change and create more pressure on the inflation rate in the country. Labour is a challenge in T&T. Just last night our Independence Square Subway store was robbed at gunpoint.
“Despite having labour challenges, we also have crime issues and other issues that our employees operate in. The challenges in our service is not because of the people at our stores but as a result of the people we cannot get to put in the stores,” he said at a seminar: Labour Challenges and its Effect on Business in T&T at the Westmoorings office of the T&T Chamber of Industry and Commerce last week Wednesday.
He gave an overview of the macro-economic statistics for the economy.
In 2015, T&T expects a gross domestic product (GDP) growth of 1.5 per cent and an inflation rate of 8.5 per cent of which food inflation is 14.8 per cent, while the unemployment rate is 3.1 per cent.
“Every economics book states that below four per cent means full employment, so we are above full employment in T&T. The Government’s strategies continue to challenge our supplies. Increased contribution to CEPEP and URP and support for GATE and many other social programmes which, if they worked to develop the future of the country would be great, but the challenge is whether the life skills that are being taught are really helping the economics of the country. The Government continues with its expansionary strategy which continues to impede our position in terms of the labour supply,” he said.
Within this economic environment, he said Prestige Holdings runs 110 restaurants in T&T and their current labour shortfall is 650 people.
“When you have a store that is supposed to operate with 12 people and four turn out; then it is a challenge to service our customers. Our ideal staffing is 2,700 team members and 505 managers. This does not include the staffing we need to continue to open stores and this ranges from 12 to 65 depending on the type of store. We actually hire, recruit, train and orient between 75 and 100 people every week.
Every week in T&T our HR team hires close to 100 people. This is due to the turnover challenges we have in the organisation.
Cost of labour shortage
Pashley said the shortfall of 650 staff members that they need costs them $25 to $30 million annually.
“So if we go to any one of the social programmes and take 650 people, train them and put them in our stores immediately this country saves $30 million. The benefit for us is: if we get 650 people in our stores then our sales will go up by a minimum of five per cent and that is $45 million,” he said.
He added that this means the Government saves $30 million and it gets an additional $7 million in VAT.
“If we get our 650 people from these social programmes, the country will benefit. We are just one company, if you multiply that twenty fold in T&T you are talking about $800 to a billion dollars in potential savings and benefits to the economy.”
Demographics
He gave statistics to show that there are 112,000 people males and females in the population in the age group from 25 to 30 and in ten years time that number goes down to 74,000.
“This is a reduction of 38,000 people in the population between the ages of 25 to 30. That is when the economy is starting to train people to move into more senior positions for people to grow their businesses. With that statistic, how do we move forward and address this labour problem we have?”
Not even a raise in the minimum wage has caused a spike in the number of people applying for jobs at their restaurants, he said.
“The increase in minimum wage—and some employers increased it in December and others in January—has not led to a larger number of people applying to the industry. In January 2015, we had 26 more people hired than in January 2014. This is in spite of between 25 per cent and 30 per cent increase in wages,” he said.
He also said the quick service restaurant (QSR) sector they operate in is not seen as a first job of preference for a large part of the population.
Despite this view, he said the industry is one of the few places an employee could come in at the entry level, work for the minimum wage and, in three years, with hard work and managerial training, be managing a restaurant.
“We are not seen as an employer of choice. However, we offer many benefits so it strange. Over 70 per cent of the candidates that apply in our restaurants do not meet basic entry requirements which is the requirement of three O Levels. We have 110 restaurants with 110 managers and two to three supervisors for each one. We normally build the management bench from within the organisation and this is because it is not available externally to bring into the system. So not being able to attract people at the entry level is affecting our ability to grow our management bench and to open more restaurants,” he said.
He also complained that the labour shortage is affecting many parts of the operation of the restaurants.
“Our sales could be better if we had more labour, our transactions could be higher, our retention rate could be higher if we had more labour. The turnover rate in the QSR industry is close to 90 per cent but the environment within T&T challenges this even further. We have a retention rate of 50 per cent for our team members that are with us for more than one year,” he said.
Labour, culture and immigration
He said the culture of work and productivity is low in T&T and reflect the inefficiency of the T&T economy.
“These cultural norms have been developed over the generations and are unrealistic. Fourteen days sick leave is now an entitlement. How can we be entitled to get sick. We are entitled to get vacation. Over the years in the public and private sector we have institutionalised the sick leave as a benefit. I do not understand how we could have reached where sick leave becomes an entitlement. The sick leave was added to union agreements to protect our employees from employers that were heartless,” he said.
He compared the efficiency index of the US labour market to T&T.
“We are actually one third as efficient to similar businesses operating within the US. This is as a result of not having the right number of workers and the built-in norms that we have accepted over generations.
He described the poor work ethic of the millennials, the age group that covers 18 years to 35 years.
“They have a mentality of wanting everything now and instant gratification. In the old days we had a university graduate coming in at the entry level and working our way up to management level. What has happened is university graduates want positions in management without prerequisite experience,” he said.
He also complained that as a society, service is stigmatised and many people do not wish to work in a service-oriented sector like the quick service restaurant sector.
“We look at serving as servitude rather than what it is, which is service. We need to get away from that mentality.”
He outlined strategies they use to get around the shortage of labour which include an aggressive recruitment drive, reducing the entry level requirements from three O’ levels to secondary school compilations certificate, incentives for team members so when they bring in new members they get a “healthy pay adjustment.”
Pashley believes it is time for the Government take a new look at its immigration policy and make it easier to bring in foreigners to work in T&T to fill the labour gap.
Pashley said immigration is one possible solution and called for a simplifying of rules that would make it easier for immigrants to come to T&T to work.
“We need immigrant labour. We need to change the approach to bringing in licenced labour. We have to advertise the position first in the media, then we have to go through the Ministry of Labour. I think we have to spend TT $6,000 to apply for the worker to come,” he said.
He called for an opening up of the local labour market.
“We need to open the market to other Caribbean nationals and reduce the cost of work permits. Open the market and gradually reduce the whole URP/CEPEP, and social programmes.”
Source:
RAPHAEL JOHN_LALL
raphael.lall@guardian.co.tt
Trinidad Guardian
Business Guardian, BG4, BG5
Thursday March 19, 2015
