Following the Government’s announcement to redefine its classification of what constitutes low-skilled workers, the latest figures from Fourth, the leading global software provider for the hospitality and leisure industries, lays bare the extensive negative impact the initiative will have on the hospitality industry.
Under the new legislation, which is due to be introduced on 1 January 2021, the salary threshold for skilled workers wanting to come to the UK would be lowered from £30,000 to £25,600.
Considering 42% of employees in the hospitality industry come from the EU, the majority of which are hourly paid, commanding an average hourly rate of £8.85 (an equivalent average full-time salary of £18,400) and 11% from the Rest of the World (ROW), commanding an average hourly rate of £9.40 (an average equivalent full-time salary of £19,500), the legislation is set to have a significant impact on the sector.
The data, which has been taken from analysis of the hourly rates for tens of thousands of workers across 4,000 hospitality businesses, reveals that the restaurant sector will be hit hardest, as 60% of its front-of-house staff currently come from overseas (49% EU; 11% ROW), with an average wage of £8.47. However, its back-of-house operations will be most affected, as 75% of this sector is made up of overseas workers (61% EU; 14% ROW), with an average wage of £9.17.
Similarly, the QSR sector – which is currently made up of 61% overseas workers (50% EU; 11% ROW) – will also be seriously affected, with its current average hourly wage of £9.46. Pubs and hotels have a lower reliance on foreign workers, however significant impact will still be felt with 33% and 40% of overseas workers respectively.
While the legislation will only apply to new visa applications, assurances have been given that existing overseas workers will be given the opportunity to apply for residency. That said, the average length of tenure in the hospitality industry is c14 months, meaning it is a heavily transient workforce dependent on a churn of workers – 53% of which currently come from outside of the UK.
In terms of nationalities that will be most affected, Poland is by far the most highly represented overseas contributor to the UK hospitality workforce (11%), followed by Italy (7%), Portugal (6%), Romania (5%) and Spain (4%).
Mike Shipley, Vice President of Analytics at Fourth, said, “This latest announcement on immigration brings much cause for concern across all sectors in the hospitality industry. This move will undoubtedly add further fuel to the fire in the industry’s ongoing fight to attract and retain the best employees.
“Furthermore, the new legislation doesn’t take into consideration the specific nuances of the hospitality industry, such as tips, which are not included in the calculations for the new thresholds.
“The announcement comes after the government announced further increases to the NLW in April, which is a double blow for the industry. The already extensive pressure on wages will be further exacerbated by a shrinking pool of workers as the tap of new labour from Europe is turned off, presenting a mountain of rising labour costs for operators to climb.
“To combat this era of unprecedented wage inflation, it’s absolutely imperative that operators gain a true understanding of the current make up of their workforce, as well as looking at ways in which they can harness the power of technology and data to be more economical and efficient with how they deploy labour.
“While the new legislation has redefined the salary threshold for low-skilled workers, it has introduced a lower threshold of £20,480 for people in ‘specific shortage occupations’, which currently includes nursing, psychology, civil engineering and classical ballet dancing.”
The statistics were mined from Fourth Analytics and based on a sample comprising more than 4,000 hospitality operators and 30,000 workers, with an even split across the restaurant, QSR, hotel and pub sectors.