The recently-announced minimum wage increase – a 35 pence controversy? asks Liz Ogden, HR Director , Group 4 Securicor (UK Security).
Who would have thought that 35 pence could cause such controversy? Debate is raging about the effect on the private security industry of the increase in the hourly minimum wage rate from £4.50 to £4.85. The private security industry, alongside a number of other sectors, is concerned that increased staff costs will put further pressure on bottom lines which are already cut to the bone with low margins.
There has been widespread discussion as to whether increased wages will result in redundancies and falling employment rates in the security industry. These higher costs will either need to be absorbed elsewhere in the business, through streamlining of core processes and efficiency gains, or be passed on to customers. Those providers that pay their employees above the statutory rates set by the government will not be immune from the impact of the increase in the minimum wage, if employees demand that wage differentials across the business are protected. However, information from Incomes Data Services (IDS) reveals that employment is continuing to grow in those industries where a statutory rate rise had a big influence on wages.
It is important to recognise that in the private security industry companies cannot simply cut security provision for customers to reduce costs, without lowering security cover for clients. A company cannot ask security officers to patrol for a shorter time, or deploy less staff on-site, without leaving the customer exposed to greater security risks. Providers that feel they have no room for manoeuvre, or the capacity to reduce costs significantly, will have to reduce profits or pass on the costs directly to the customer.
The minimum wage increase is another stage on the long journey towards elevating and raising standards in the security industry. This is a cause driven and championed by the Security Industry Authority (SIA). While the minimum wage increase and the SIA initiatives appear to be two separate issues, in fact they are interrelated and will have a profound impact on the future of the private security industry. The increase in the minimum wage is a further signpost in the move towards increased labour costs within the security industry. Licensing was introduced by the SIA January this year and it has been predicted that the labour pool will shrink, as some guards from less reputable providers are denied licences. This will have the effect of driving up standards but could also drive up costs across the industry.
Under the new licensing laws, each security officer is responsible for obtaining their own licence and it will become a criminal offence to operate without one. It is anticipated that a number of employees in the private security industry will leave as a result of the new licensing regulations and stringent standards laid down by the SIA.
The traditional economic supply and demand equation states that as supply reduces while demand increases, or remains constant, wage rates will inevitably increase. No provider of private security solutions will be able to avoid the impact of regulation. It is anticipated that employers will be forced to increase wages if they wish to retain staff, as the number of vacancies in the private security industry increases. Viewed in this light the minimum wage increase is a wake up call for suppliers and customers. Change is inevitable and it will not only drive up standards across the industry, but have an attendant impact on costs. Companies need to plan now and adjust their long-term forecasts to take account of the impact licensing will undoubtedly have on the security industry.
While wage rates are an important consideration, it is important that employers address other staff issues. Security officers will be in demand and will be able to choose which employer to work for. It is important employers create a nurturing environment for employees where they still feel valued and their achievements are recognised. Workers need to feel there is adequate training and a clear career structure. It would be short sighted for any employer to simply look at wages.
It is imperative that the security industry educates clients that fees and margins must allow for long-term investment in the sector if we are to attract high calibre individuals to work in the industry. Providers and employers need to receive adequate revenues to enable them to invest in infrastructure and training, while ensuring that customers receive a viable and effective security solution. The focus on wages reinforces a worrying industry trend in the security industry, where people focus solely on costs and revenues and not on the added value of the service they receive. All parties must look at the value proposition – the value of the security offering to the customer’s business and the extent to which it will mitigate their risk. Ideally security should not be bought and sold as a commodity; the quality of a security solution cannot be determined solely by the wages paid to the onsite security officers. Increasingly the security officer is only part of the solution working alongside access control systems, CCTV and alarm systems.
The private security industry will need to address the long-term impact of rising wage rates. Employers in the sector can look towards rationalising process and increasing efficiency as costs rise. However, in the long-term customers may have to pay more for their security solutions.
