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The Recruitment Problem Dividend

  • Nick Gibbs

For many Ibizan businesses 2017 marked the first real change in the recruitment balance of power. For many years the employers have frankly had it easy. A seemingly never-ending supply of fresh faced workers ready, willing and sometimes even able, to do jobs that would often not get past any UK job centre’s scrutiny of pay, conditions and legal employment compliance.

There are employers out there who have chosen to adopt such principles as non-discriminatory recruitment ‘voluntarily’ as part of a business strategy or personal beliefs system, however for many and probably not an exaggeration to say for a significant majority, such restrictions and considerations have been abandoned in favour of a typically Ibizan way of doing things. Looking in from the outside it may well seem mad and unfair, but to those working within it the Ibiza way of things is as natural and logical as can be. It has been the established way for many years, and if it ain’t broke, why fix it?

The Ibiza Way

In essence this is how the summer worker market has always worked until very recent years.….

Workers arrive clutching an armful of CVs. What the market really wants is young, beautiful, outgoing people, who are willing to do pretty well anything, under whatever terms and conditions are offered.

Sorry, but it’s tough out there. Ibiza summer season employment has never been an easy place to develop a personality if you don’t already have one, nor a platform on which to make a stand for sexual equality or campaign against the objectification of women. As one prominent party bar owner said to me once, “if you can find a bloke who will fit in my shot girl’s hot-pants and is willing to wear them, I’ll agree to give him an interview”.

The Jobs themselves have a clear and distinct pecking order.

Anything with a contract.

For many workers, and certainly for residents, a bottle washer with a contract of employment trumps cocktail waiter without. The reason is simple – the contract enables the worker to claim dole (padron) during the winter months and so is worth something like a third to a half again of the amount being paid in wages.

Things have changed very recently, which we cover below, but until 3 or 4 years ago most contract jobs were snapped up by residents and there were not enough of them to go around. Getting a contract job confirmed was certainly enough to warrant a ‘chuffed to bits’ facebook post and the congratulations of your peers.

No contract, but an actual job.

There were not enough of the contracted type to go around, and so plenty of residents went into the melting pot for the second tier of jobs alongside the 2nd, 3rd, 4th year returning summer season workers.

These were paid entirely off the books in black money, but were at least a definable job – barman, waitress, that kind of thing. Jobs which come with hours and a monthly survivable amount of money.

A small number of the very best and most strongly presenting first year workers will have been able to get themselves a job at this level too. But in general terms, any employer offering this type of job was still spoilt for choice with vastly more applicants available than there were jobs on offer.

No contract, how low can you go job.

The next tier down was the long/wrong hours low pay job that may just about pay enough to stay in Ibiza if you had some resources of your own and were prepared to stay in pretty crappy living conditions. We are talking 5€ an hour bar backs end of the market – and again, still no shortage of takers among the new arrivals.

No contract, arguably no job.

Once you get down to the bottom rung, such notions as an hourly rate are as aspirational as a pre-revolutionary Russian peasant’s pay demands. Late arrivals and the less able and, counter-intuitively, the less gregarious, would be left with options limited to commission sales p.r. or shot girl, or beach ticket sales etc.

As the advert would always claim, great money could be earned, but only by the very small percentage who had the right skill set – and if a person did have that skill set, chances are they would have got themselves something higher up the tree.

The one notable exception here is the eternal screw up – and there is no shortage of them in Ibiza. The worker who knew as well as their friends knew, and often even their employer knew, had no prospect whatsoever of getting through an entire season without some monumental screw up that would leave them sacked, with the commission p.r. job as their only available safety net – as close to a national insurance scheme as Ibiza was ever likely to get.

And so it was. The employment status quo that had been in place for many years. With little more than the occasional gripes of workers re low pay or poor conditions, and these rarely voiced more strongly than that which could be overcome with a strategic round of shots, Ibiza’s unique employment marketplace showed no reason or desire to change.

Then stuff happened.

The big sign up.

Looking back just a few years it is amazing to think of the level of widespread illegal employment in the tourism sector. Of course it still exists, and in some types of business may even still be the norm, but the major change has been that just a few years ago it was the norm on an institutional scale.

Even very large businesses with globally recognised brands were employing staff with no contracts and so paid entirely in black money, or quite often misrepresentative contracts – a full time employee showing as part time on minimum wage, with the majority of their income paid black off the books.

But gradually it started to change.

I could look to dissect the business brains of Ibiza to find some noble causation behind the move to legal contracts, perhaps some realisation of the value in continuity, or divine inspiration demanding a fairer divvy up of the Ibiza income. I could do that, but we all know it would be nonsense.

The fact is that most of the larger employers switched to employment on legal contracts for one reason and one reason only – the fear of getting caught.

I talked to one Spanish club administrator who said to the effect that (in the good old days) “all I had to do was log in the bolsas” (sealed bags of takings). “But now I am forever issuing contracts. Start contracts, finish contracts, sometimes both at the same time – it is like they will not have anybody in the building who is not on a contract, like they are scared of the hacienda”.  Perish the thought.

Many medium sized employers slotted in alongside the more vociferously complaining big boys. In the space of just a few years Ibiza seems to have moved from one of widespread illegal employment to one where most venues have at least a core of employed staff, perhaps an uncontracted extra pair of hands or two slotted in for peak season savings when it is assumed the law of averages means their chances of being spotted are at a minimum.

The cost of compliance

Of course this change has come at considerable expense, the Spanish social security payments will add a few hundred euros per month for each contracted person. Sympathies will vary. The big clubs have long held the reputation of having a licence to print money. Whether or not it is true will not alter the fact they are likely to have very few people sobbing into their hankies at the prospect of the big clubs and other successful venues contributing something back into the Spanish economy before it disappears overseas or from the face of the planet.

Expensive as it may be, the transition to paid contracts has been largely self managed by the employers. Ultimately they have decided if and when to go over to the white side. But 2017 has brought new challenges that Ibiza’s employers were largely surprised by, and for perhaps the first time it could be said that the balance of power in recruitment had the scales tip in the favour of the employee.

2016, and all that.

The signs were certainly there in 2016. For the first time in my memory employers were having to do a bit of hunting to find people to fill jobs that would have had a queue forming in previous years.

This was at its height toward the end of the season when all the workers who were really students in disguise revealed their true college colours and departed for the new academic term in September. It may seem surprising how easily somebody with a string of hugely impressive qualifications, showing themselves as part way through a university degree, is able to convince employers so readily of their commitment to see the season out – but of course the reality is that the employers in the past have never been unduly bothered. They could afford to take the risk as there were plenty ready to fill the gaps the students’ departure caused.

2017, Where are they?

This was the first year where the staff shortage was apparent from the outset. The beginning of the season would normally be a time when social media and local notice boards would be advertising accommodation and employment wanted. Of course, there would still be jobs and recruitment days but historically you would rarely see an employer needing to re-advertise a decent job.

This year there was a huge reduction in the accommodation on offer, and what was available was so expensive as to be often getting on for parity with the established pay levels.

For the first time employers were seen making pleas for accommodation on behalf of staff they would otherwise lose in the light of not being able to find accommodation. There was a reported slump in the number of people arriving, and of those that did come, many left again unable to find a reasonable pay and rent balance.

Inevitably those who were here and had found accommodation were in a much stronger position. Perhaps pick and choose would be an exaggeration, but certainly they could be confident of finding something else very quickly if they did not get on in their first position. Or second. Or third.

The result was that some businesses found themselves in the unusual position of being in a near permanent recruitment mode. For some at least, ‘man down’ became the norm.

The staffing situation in 2017 was so bad that of all businesses I talked to, the huge majority highlighted it as their biggest problem of the year.

But how much of a problem was it?

The staff shortage dividend.

Operationally it will have proved tough. Preparing staff schedules without enough staff. Having to deal with staffing during the busiest part of the season when all attention is needed to the public facing side of the business. And there may have been compounding factors, the overworking of other staff because of the shortage may in turn make the existing staff move on.

But to what extent did it harm the business? Come the end of the season most will be measuring their success on their financial performance over and above any other factors.

Let’s do some maths …

Assumption of a medium sized tourism trade business employing 10 staff and being 1 post down all season, at an average 2,000€ per month cost of employment.

2,000€ x 6 months of season = 24,000€

Assumption of a 60% GP (gross profit over cost of food/drink)

Assumption of a 10€ average customer spend for a bar, 25€ for a restaurant.

Each bar customer generates 6€ profit, each restaurant customer 15€

24,000€ divided by 6€ = 4,000

24,000€ divided by 15€ = 1,600

The business has saved 24,000€ in staff cost

For the bar in our example this would equate to 4,000 customers over the course of a season, for the restaurant 1,600 customers.

But would they have lost this amount of business due to being a man down?

In the vast majority of situations, no they would not.

How many less people would use that business because it was a member of staff short? None, (unless it was a street P.R. job).

And so, with exactly the same number of people coming through the door, how many of them would not stay and spend exactly the same because the business was short staffed? A few, but not many. Perhaps a few people might not want to wait as long as they would have to because of slow service resulting from being short staffed – but the amount lost over the course of a season would be nothing like the 24,000€ saved.

There are exceptions.

A very small business running on 4 staff may find it impossible to open their full hours if a man down, which would have a significant effect on income.

A very busy restaurant may have to close some tables, which again would lead to a direct loss of business.

A business employing salespeople where the very nature of the business means the more employed the more they make cannot follow this example.

But in the vast majority of cases the business will probably do exactly the same amount of business if the staff post is vacant as they would if it were filled.

The consequence would perhaps be no more than a routinely overflowing pile of dirty crockery at the end of the night, or a regular exhausted slump into the chairs at the end of service – but what’s new about that?. Come time to count the cash at the end of the year these things will be forgotten, or if not forgotten at least forgiven, in return for a bulging bag of cash.

On average I estimate a business could be around 20,000€ to the good for a job left  vacant.

Risky Business

Ratings

Before basing a business boom-time on a state on constant staff shortage it is important to point out the risks involved.

Quality of service is of ever increasing importance in the hospitality trade. Perhaps your business has been working at or beyond staffing capacity this year. Have you noticed a slip in your review scores? Like it or loathe it, the customer ratings on tripadvisor, google, facebook etc, carry huge importance. Push the staff shortage too far and your service standards are bound to suffer as a result.

On the other hand if you have been short staffed all year yet have not received one bad rating with any mention of the speed or quality of service, perhaps you can afford to take advantage of man down? Perhaps it could cause you to look at whether you have been overstaffed in the past?

Staffing

There is also the question of morale among your existing loyal and committed staff team. They may have been willing to go the extra mile for you in an extraordinary season, but will they do so again for a second year? Losing you most valuable team members is likely to cost you far more than any savings to be made from purposefully not recruiting to a vacant role.

That said, some businesses do exploit the savings to be made by working in a perpetual state of man down. In my days working in recruitment in the City of London, the port and cheese end to a long boozy client invitation lunch was often accompanied by a request to go slow on a particular role. We, the recruitment agency, could be conveniently blamed for our inability to find somebody to fill a role. Meanwhile their absence would be absorbed by their team whilst saving the employers five figure sums every month. The numbers were more extreme, but the principal was the same – few clients would have ever thanked us for working too hard to fill every vacancy on our books.

And 2018?

So what of 2018? I think it is a hard one to call.

For sure there will not be an immediate return to the noughties ease of recruitment over-supply. Ibiza is now flagged as a tough place to do a season because of the ridiculous rental prices.

The rental market is showing signs of returning to pre-AirBnB days, with the property portals one by one pulling the plug on the illegal holiday rents. But even if this trend continues it will not be until the start of the season in 2018 we really see a true rental market picture – and it would take some time to get the word out to the workers that Ibiza is again a realistic prospect for summer employment.

Employers may need to adjust their recruitment strategy. They may consider paying higher wages, working harder on retention, and perhaps some imagination needs to be applied to have workers fulfil the entire season.

Then again, they may just count their cash and settle into another tough, but ultimately profitable, season to come. Profits that are boosted by the man down dividend.

 


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Compared to 2008, there are now around 1/3rd more of them, they still work 2 hours per week more than the Spanish average, & unemployment is at its lowest.

 

 

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