Selling people short

23 June 2005
Selling people short

UK hospitality is thriving, with an estimated 60,000 hotels and 56,000 restaurants. According to the industry's Sector Skills Council, People 1st, the sector employed more than 1.7 million people in 2003 - a leap of 200,000 from 2001.

But what is the industry thriving on? Increased tourism and interest in food? More and more of us dining out, or seeking a spa and a suite for a weekend getaway? All of these have undoubtedly led to growing sales and profits; but what keeps the hospitality sector buoyant - by holding costs down - is cheap labour.

This is nothing new. By its nature, the hospitality industry has always relied on those prepared to carry out menial duties. What is new is that, as managers and senior staff have turned their gaze to the bigger picture - budgets, expansion plans, increasingly complex legislation and fierce competition - their attention has wandered from the less glamorous elements of their businesses.

There they would find a murky world of temporary staff, contracted workers and outsourced services that has little or no contact with top management. Hotel chains have handed on responsibility to employment agencies and facilities management companies, which are now in charge of putting the lowest-paid workers into jobs. But who is in charge of these agencies? Who keeps tabs on their workers' pay and conditions?

Of course, the national minimum wage (NMW) was brought in to protect the lowest-paid; and the Government is preparing to raise it again in October, from £4.85 to £5.05. All well and good for the workers, except that its implementation in the UK hospitality industry is far from universal.

Talking to agency workers reveals some unpalatable truths. A Polish worker said that one agency forced newcomers to pay £250 as a signing-on fee to guarantee work. Another agency pays staff £100 in the first week, but provides no payslips, no holiday, no letters to banks so that the worker can set up an account, and often withholds the final week's wages. In fact, workers are often forced to sign a form, illegally, that makes them self-employed and liable for tax and national insurance contributions, while the agency absolves itself of any responsibility - or financial outlay.

Tinpot agencies Tony Hailwood, managing director at agency Capital People, which supplies permanent and temporary staff, estimates that London is riddled with small-scale, tinpot agencies that are not playing by the book.

"I would guess there are as many as 300 agencies," he says. "Out of those, 200 will be turning over less than £500,000 a year, and I reckon 50% of those aren't doing things properly."

To test this, Caterer sent an Indian student posing as an illegal worker to three London agencies to register for work.

One agency told her to come back in three weeks, while another carried out the correct procedure and said she would need a full working visa if she wanted to register. However, at the third, which has large central London hotels among its clients, the student was able to register with just a photocopy of her passport and no other form of authorisation. The company, Hotelcare, with offices in Hatton Gardens, then sent her a text message to offer her work the very next day as a housekeeper at the Jurys Inn, Great Russell Street.

As of May last year, to coincide with the enlargement of the European Union, new guidelines came into force. They clearly state that a work visa must be seen "before a person begins working for you".

When we asked Marius Blasco, managing director of Hotelcare, why these checks hadn't been made, he first said that the person who registered our student was perhaps not qualified to do so, but then added that her visa would have been checked at the hotel when she turned up.

Although Blasco says our student would have been asked to bring those documents with her, she denies that she was ever asked to take any further documentation. No mention of this requirement was made in the text message, either.

What is worrying is that Hotelcare's clients are putting their trust in an agency that doesn't have a strict registration procedure, or is not implementing it consistently.

Jurys Doyle Hotels says it has written confirmation from Hotelcare that all Hotelcare employees have the necessary work permits. The hotel chain also says that it carries out independent audits of Hotelcare's files. "We are satisfied with the outcome of those audits," said Con Ring, Jurys Doyle group general manager UK (South).

Other agencies said that seeing a passport correctly stamped at the point of registration was an absolute minimum before the process could continue.

John Egan, from the Elite agency, which supplies housekeepers to many luxury London hotels, said: "We insist on seeing a passport which has the proper authorisation. If we are not happy with it, then we won't register them. But we have to have references, too."

Our student had neither. Surprisingly, Blasco insists that he holds copies of correct documents for all Hotelcare employees, and he says he defends this clean record by withholding wages from staff. "There are staff who refuse to bring the proper documentation," he says, "but I have their pay packets here in the office, which I won't give them until I have seen the documents."

It seems he was not only refusing to pay them, but he was also allowing people to work who hadn't yet demonstrated they were legally entitled to.

Allowing workers with no legal status to take jobs nurtures bad practice and exploitation.

Our student was offered a rate of £1.94 per room, and expected to clean two-and-a-half bedrooms per hour. There is nothing in the minimum wage legislation that says employees can't be paid on a piecework basis, but in order to meet the NMW-equivalent pay for a standard seven-and-a-half-hour day, she would have had to clean 19 rooms.

Unrealistic target Blasco says he has never received any complaints that this is an unrealistic target but, according to Anne Gaston at Elite, in most four-star hotels housekeepers can only reasonably expect to clean up to 14 rooms. If our student had managed to clean only 14 rooms, she would have earned an equivalent hourly rate of just £3.62.

The NMW was meant to bring in a sense of stability and turn dead-end jobs into feasible options for earning a living wage. Accordingly, it would be in our industry's interests to uphold it, rather than continue filling positions with a succession of disinterested and disillusioned staff. But by going into partnership with unscrupulous contractors and agencies, some hoteliers are turning a blind eye to bad practices.

"It is meant to be down to due diligence," says Rob Hancox, operations director at recruitment agency Admiral. "But hotels realise they are bringing in dodgy agencies. Agencies are bullied into supplying at the right price."

If you consider national insurance contributions, employers' liability insurance, holiday pay and other charges, Hailwood reckons that the bare minimum hourly rate a hotel can pay an agency worker must be £5.70 before there's any hint of profit for the agency. Anything less and the agency is unlikely to be able to meet the current £4.85 minimum wage. Hancox agrees, and adds: "If the agency is making any money at all, anything under £7 an hour is questionable."

But with human resources (HR) departments themselves under pressure to cut costs, Capital People, Elite and Admiral all say they have lost contracts because a competitor has come along offering a rate that they can't feasibly meet. One former HR director at a five-star hotel, who wishes to remain anonymous, says memos were passed down from head office which explicitly told staff to cut costs by any means - even to the detriment of customer service.

Hailwood believes part of the problem is that HR departments have been devolved, with more responsibility passed to lower-level management. "HR roles have been changed," he says. "They used to cover everything. Now F&B or housekeeping managers are given that control."

Lowest wage With pressures to meet budgets and satisfy the chain of command, it's easy to turn to the agency that offers the lowest wage. "At multinational hotel companies, national headquarters are under increasing pressure from shareholders to match London wage costs with everywhere else," says Hailwood. "In Singapore, though, those costs might be only 12% of turnover."

Recent attempts to self-regulate and banish bad practices from the industry have included Investors in People accreditation and the Campaign for Courtesy in Recruitment, part of the British Hospitality Association's (BHA) Excellence Through People scheme. Roddy Watt, chief executive of the Berkeley Scott Group, was instrumental in setting up the courtesy campaign, but admits that in real life its impact can be limited.

"It wasn't meant to change the world, and was not triggered by concerns for the minimum wage, but it was meant to show the Government that at least some members of our industry took these issues seriously," he says.

"The problem is that, even if you are a member of something like Excellence Through People, often someone at head office has signed up and it doesn't cascade through to the people on the front line," he adds.

And although the Department of Trade and Industry (DTI) and the Home Office are energetic in highlighting the importance of Britain's improved labour rights, they are a little less effective when it comes to its policing. One recruitment consultant says the DTI never checked her in six years at a temporary recruitment agency; Hancox says that the Home Office has approached him only twice, but he has never had his payroll audited.

Tom Hadley, a spokesman for the Recruitment and Employers Confederation, says the DTI has only 11 inspectors for 12,000 employment agencies across the UK. "There is more and more regulation but not enough enforcement," he says. "Many of our members see themselves spending money to comply, but down the street some other bloke is getting away with paying nothing."

Watt extends this call for action to the hotels themselves. "I think it is outrageous and astonishing that major employers - blue-chip, publicly quoted companies - are not allowing worthy recruitment companies to do business on a level playing field," he says. "The DTI needs to be a lot more active so that employers realise they might get caught. At the moment the chances of that are very slim."

For Watt the issue extends beyond the exploitation of workers to terrorism and threats to national security. "I guarantee that some of the biggest London banqueting venues haven't got a clue where all the waiting staff are from," he says. "What happens if a guest attending one of their functions is a figure someone wants to blow up? There might be an added expense to get everyone checked out properly but, frankly, if it was between that and the Queen being shot at your hotel, I know which most would choose."

Of course there is a need for more workers in the industry. The figure of 100,000 has been bandied around by the BHA for some years.

However, it is clear from testimonials that even being legally employable doesn't protect you from exploitation.

At best, many new workers arriving from the new Eastern European EU states don't know their rights. At worst, they are too afraid to report their experiences to either HM Revenue & Customs or the Home Office for fear of losing work.

And it is not only the employees who are afraid to blow the lid. Agencies that play by the rules are afraid that by "shopping" those competitors that don't, they too will lose business from their hotel clients.

HR departments and general managers need to regain control of the basic procedures that see staff come into their hotels. "It needs all GMs to ask to see all records from the agencies - liability, payrolls, payslips," says Hailwood. "No one seems interested in sorting this out - it's profit before people. But businesses have to know the implications if they don't audit agencies."

For the time being, one of those implications is an ever-growing black market in our industry. But the implications for the future are even grimmer: a workforce of disenfranchised, unmotivated staff; falling standards; the cost of continual retraining; and the lack of core UK staff choosing hospitality as a viable career.

Hancox sums up: "Exploitation leads to more exploitation, and it becomes a vicious circle. The rise [in the minimum wage] will affect business, but it is for the best, otherwise workers will continue to be exploited. It is about time our industry realised that."

Don't get caught out
If you are employing anyone, through an agency or not, you must carry out your own checks on their legal status in order gain your statutory defence. This will protect you in any case brought to court for employing an illegal worker.

The types of documents that you are required to check and which prove the employee's eligibility have been changed as of May 2004. Included in the long list of documents are:

  • A passport from the European Economic Area or Switzerland.

  • A passport with an endorsement stating that the holder has a right of residence.

  • A passport endorsed to show the holder can stay indefinitely.

  • An Application Registration Card for an asylum seeker, stating the holder is permitted to work.

There is also a combination of documents that can prove an employee's eligibility to work, which must include proof of a national insurance number together with one of several other options. To find out more about these documents and other changes phone 0845 010 6677 or visit and click on "Preventing illegal working".

When the worker remains employed by the agency - which is often the case in respect of temporary appointments - it is solely up to the agency to carry out the checks. However, you must get assurances from the agency that they have carried out the checks - make it a written condition of the contract, if necessary - and ask to see copies of the staff's documentation. Even if it is not your legal responsibility, ultimately it will be your hotel that hits the headlines when immigration officers raid the property at dawn or, worse still, a breach of security reaches the press.

Finally, if you are suspicious about how much the employee is being paid and whether it conforms to the national minimum wage, ask to see copies of the payroll. If you think you have any unscrupulous practices to report, telephone HM Revenue & Customs in confidence on 0845 600 0678.

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