The Cost of Legislation

Transcript

Clinton Anderson (Podcast Host: CEO, Fourth): Well, I’m excited to be here today to talk about a very important topic for the hospitality industry here in the UK, the role of government in our business.

With some of the things that are happening both locally and internationally, we recognise that government policy can have a massive impact on our lives. Whether it be our personal lives or our professional lives. Over the last 12 months we’ve clearly seen that here in the UK industry.

What we’d like to talk about specifically today is the impact of the Employer National Insurance Contributions and Minimum Wage increases, and how that’s impacting the operations of restaurants and other hospitality providers throughout the UK, and how those cost increases are being managed. I think it’s a topic that’s really important and timely, and so I’m really grateful to have our experts on our panel today.

But before we dive into that specific topic, I think I’d be remiss if I didn’t get a chance to just ask our experts how things are going in the industry.

So, Kate, let’s start with you. What are you seeing more broadly in UK hospitality? What’s going on?

Kate Nicholls (Guest: CEO, UK Hospitality): I think in keeping with the last five to six years, it’s a pretty turbulent time for the sector. We seem to have been in a state of perma crisis. I’ve done an A to J of the last six years of austerity, Brexit, COVID, debt, energy, food prices, food supply chain disruption, geopolitical events and wars, the high street and the closures, and then jobs with the jobs tax and inflation, the cost of doing business, cost of living.

It’s really intense out there. And operators are struggling with resilience, as are consumers. And that means that it’s very febrile, and very uncertain. And that’s what I get when I talk to most of the operators and businesses that are out there.

They have a good day and they couldn’t tell you why it was suddenly a good trading period. They have a bad day, and they can’t tell you that either. So that flat, fierce, fickle market that we’ve seen that characterises the last 12 months shows businesses are really struggling.

And when you look at all the metrics, whether it’s sales data, footfall, openings and closings, the industry is in a state of stasis. It’s stabilised. We’re not seeing the declines. We’re not seeing the damage that we saw with the height of those crises that I just went through. But we’re also not seeing the recovery in the pickup.

And there is a lack of confidence out there, business confidence, investor confidence, and consumer confidence. And that takes us right back to what’s happening with government, because you’ve got that maximum uncertainty.

And on this side of the Atlantic, when we wake up in the morning, something could have been happening in America or abroad, and that impacts things even further.

Clinton Anderson: Things we never imagined impacting the industry, right?

Kate Nicholls: Absolutely. We are an export in terms of tourism, but we are not impacted by tariffs. But that trade policy, trade war, deters people from travelling, which also creates that sense of unease amongst our consumers that things might get worse. The economy might go further down. If you wake up and Trump said something new overnight, that can be challenging, and that just leads into that uncertain atmosphere. And our businesses need confidence for people to go out and spend. We are discretionary. People need to feel good about themselves to go out and experience what we can offer.

Clinton Anderson: It’s interesting you use the word uncertainty. I think that maybe best encapsulates what we’re seeing.

When we are doing well in the industry, we know how to manage in those situations. When we’re seeing retrenchment or regression, we know how to deal with those situations like a tough economic environment. But we’re in this weird kind of limbo right now. Where that uncertainty creates a lot of stress. And I think that’s a really hard place for operators to live.

Dawn, what’s your perspective? You’re in the middle of things as an operator. What are you seeing more broadly in the industry?

Dawn Browne (Guest: People & Talent Director, Fullers): I think Kate’s right in everything she says, but I sort of feel obliged to point out the positive and to balance it up a little bit. Look none of that takes away from how special the hospitality industry is, and there is no doubt it is super tough for every operator. It’s super tough. And we’ve, we’ve certainly proven our resilience. But when the external conditions are right, when the sun shines, people still want to come out and eat and drink in our businesses. And I take a lot of comfort from that, that when the external conditions are right, hospitality’s still a great place to be for our customers.

And despite the challenges, hospitality continues to be a great place to work. We continue to provide many, many people’s first roles, the first jobs they ever have. We continue to provide great places to build your career.

So yes, the external factors are pretty tough right now. As tough as they’ve ever been. People look back at COVID and remember how tough it was, but actually, it’s still just as tough now. But we’re a resilient, we’re a resilient industry.

Clinton Anderson:  I love that word.

Dawn Browne: We’re a real collectivist industry and society.

Kate Nicholls: We’re very collaborate and supportive. And so there’s a lot that happens to help people through that.

Clinton Anderson: I didn’t grow up in the hospitality industry, but when I came into this in the industry 10 years ago, both on the hotel side and the restaurant side, I’ve noticed that collaboration. That kind of collective view of we’re in this together. We’re struggling to create amazing experiences. And we all have that love for the industry. That’s one thing when I look at industry veterans, they just have hospitality flowing through their veins. It’s how they treat people around them. It’s how they approach the world. It’s this unique combination of kind of positivity combined with grit.

Kate Nicholls: Ultimately, it’s a people industry and it’s an experience industry. And that’s why it will have a future. Whatever happens, whatever is thrown at us. It will survive what’s happening with the AI revolution, because you can’t replace that. A machine can give you service or a product, only a person can deliver a great experience.

And the brilliant thing about our industry is we give millions of people, 20 million people a week, a brilliant experience, and a break from the every day in their week when we serve them. And that’s the sort of hug in a cup of coffee or a warm feeling when you go into your local pub and you can talk and communicate and engage. And it’s making a human connection.

Clinton Anderson: There’s a great story back in the Great Depression, about how movies boomed during that time. It was the golden era of movie making. And a lot of it was people were looking for a good experience at a time when life was otherwise stressful. And I think hospitality fills that role today. We think about our best experiences at a pub, at a restaurant, at a bar. Our best experiences in life are often with family and friends in those situations.

Kate Nicholls: Which is why Dawn’s absolutely right, when customers get the confidence to come back out, I always talk about it now as being permission to spend, I don’t think Rachel Reeves has given them permission to go out and spend, but 87% of customers now say that their top thing that they will do when they’ve got any disposable income is go and socialise, eat and drink out with family and friends in a hospitality venue. The third thing they’ll do is take a short break in the UK with their family and friends.

That’s what they’re looking forward to. It’s what they missed during COVID. It’s what they came back to. And they want to do that again. It’s just about whether they feel confident enough to go out and do it and spend their money.

Clinton Anderson: That’s really interesting because if we look at our boomer parents, they’re about getting stuff. Those of us who are Gen Xers, we’re a mix of both, generally just kind of sarcastic and a little frustrated with life, but we love that about ourselves. But if you look at the millennials and the Gen Zs they’re all about the experience. And that’s another trend that bodes very, very well for the industry.

Kate Nicholls: Absolutely. But also there isn’t new stuff. Yes, you are replacing old stuff, but there isn’t any new technology. And it’s a sign of how you evolve as a society and economy as well. You move away from primary production, into services, manufacturing, then you move into professional services, and then you move into experience.

If you’re not homeowners and you’re not spending your money on rent and all those kind of things, the discretionary income is around experience, because you can’t buy new products. When we were growing up, the microwave was brand new. The iPhone was brand new. The internet was brand new. They’re just getting replacements for old products. There’s nothing new and innovative, but there are new experiences like flight club, like all that competitive socialising. The industry continually reinvents itself. And that’s what makes it so exciting.

Clinton Anderson: I am a technologist, so I am going to make the argument, there are lots of cool new things still coming into this world, but I agree that the experiences are maybe the realm of unlimited creativity, right? And, and that’s where I think we see the hospitality concepts come in with so many great ideas.

I have two or three more podcast ideas based on this topic alone, which we’ll have to revisit later this year. So, expect an invite back, because I think the four of us could have a very interesting conversation on these two topics alone that we just covered.

But let’s get in deeper into the topic, du jour, which is government impact on our industry, specifically the employer National Insurance Contributions going up via legislation and increase in minimum wages, suddenly putting a lot of pressure on operators who are now facing maybe less flexibility to manage costs than they had in the past. And certainly seeing increase in their cost of labour.

Kate, we’ll start with you again. How is this legislation impacting operators?

Kate Nicholls: Well, collectively, that hit from the budget was 3.4 billion pound tax bombshell that hit the sector in April.

Clinton Anderson: Born explicitly by operators?

Kate Nicholls: Yes, born explicitly by operators. It’s in addition to the employment issues that you talked about, the employer national insurance. It’s not just the rate, the disproportionate impact for our businesses in our sector was the change in the threshold, halving the threshold at which national insurance, that’s now at 5,000 pounds. So previously somebody could work 18-20 hours a week and be below the threshold. Now you’re looking at somebody not being able to work more than around seven or eight hours a week and that takes away a lot of flexibility. So it’s one shift as opposed to two, three over the course of a week. So those part-time workers, that flexible workforce that was wanting to come and work for multiple employers, that’s now become much more expensive and and much more impactful. So it’s a 75% increase in the tax rate for those entry level part-time jobs below 20 hours a week.

Clinton Anderson: Let make sure we understand that number. A 75% increase in the tax rate.

Clinton Anderson: That’s a massive, right? So sometimes we think about the broader society and the population, they’ll hear this in the news, and they don’t really understand what it means.

Kate Nicholls: It’s employee NICs, it’s national living wage, and its changes in business rates. Those combined legislation from one budget, in one day. That’s what Rachel Reeves passed through.

So that’s a cost that you can’t absorb as a sector, or as a business, you’re going to have to make some difficult decisions around this.

Clinton Anderson: We’re not far from the city, right? We’re not the finance industry, who has these gigantic margins, right? We’re in hospitality. We live on pretty thin Margins.

Kate Nicholls: Absolutely. As a result of COVID, our margins have been reduced by around 40%. So the net margins are paper thin. We rely on a high volume of low spend items coming through by and large, and delivered by a flexible workforce. So you’ve suddenly made that much more expensive.

It is the most regressive tax change I’ve ever seen in all the time I’ve been working in politics and hospitality.

Because it means that you are taking away opportunities for entry-level jobs for younger people, for those first jobs that Dawn was talking about.

The people who are most impacted by this Saturday shifts part-time workers, students who are looking for a small number of hours and those who are returning from work because they’ve just been made much more expensive.

So as a result of that, what our businesses are saying to us is, one in seven are going to have to close a site. 30% are going to have to reduce their hours of operation, which means that 70% are cutting staff hours, staff head count.

And there’s also an impact on salaries, because it’s flattened out salaries for staff to be able to manage that cost.

There’s a real impact on job opportunities and job cuts are inevitable, but also salaries for our higher paid workers, because we just can’t absorb that.

Clinton Anderson: It’s curious, right? Because I think sometimes this legislation is positioned as a good thing for the worker. But in this case, I think it’s a bit of a curious irony in that it fact, it has the opposite effect.

Kate Nicholls: If you want to have sustainable, good quality jobs and investment in people, they have to have a job at the start of this. And if you make it too expensive to employ people and you reduce the head count, it doesn’t matter how much the national living wage goes up, if you are not having that job anymore.

Clinton Anderson: This was Dawn’s point earlier you had highlighted that this is many people’s entry into the workforce.

Dawn Browne: Absolutely. And you can only make work pay if the jobs exist to start with. If you layer and layer and layer, and in my opinion, it’s the layers of costs that are the problem, not the individual items. If you keep layering and layering and layering cost, it becomes unachievable to employ people. I think Kate’s exactly right.

And the other point you made that I think is really important is, of course, we want all of our workers to have great pay. Of course we do. But the more that you continue to push the minimum wage, the harder we find it to maintain the differentials between roles.

And hospitality has notoriously been an amazing place to have a career. You can run a million pound business at 25 in hospitality.

Clinton Anderson: There’s many stories of success of people coming in at entry level, minimum wage jobs, and 10 years later, running multiple sites.

Dawn Browne: It gives people the most amazing opportunities. But if we are really struggling to continue to pay people those differentials, why do they want to grow their careers in hospitality? Why do they want to continue to train and develop and become managers and then become general managers and become area managers? It becomes significantly more challenging for us as a business.

To your point that the cost for us this year are equivalent to a third of our profit.

Clinton Anderson: You’re not alone there, right? We’re seeing many operators who a third to a half of their profit is being wiped out by these actions by government that are basically a tax grab.

Dawn Browne: And we are luckier than most, we are an incredibly stable, very well backed. We’ve got a very strong balance sheet. We are luckier than most. If you are a business, a hospitality business, trying to get off the ground. If you are a new business, I worry that this will stifle innovation and all those new amazing things we’ve seen from hospitality in the last few years. Where will they come from?

Kate Nicholls: It’s inevitable because the bit of the balance sheet that you’ve taken it away from is the margin that you had for investment. And I think that’s what government often fails to realise is that we take it from our small profits, and we have a small net profit, we take that to be able to invest in the future, to either grow organically, if you’ve got one site and you want to expand to two or to reinvest in product, reinvest in innovation and people. And that’s the bit that’s just been taken away.

Clinton Anderson: So this is really interesting because from a perspective of government policy, government has to be very careful because if you’re not thinking second and third order effects, you can have an opposite impact. What I think I hear you saying is this is wiping out a lot of profitability and that part of the profitability was typically for site expansion or innovation. And so therefore, an industry that could be growing, expanding is in fact being kind of shackled.

Kate Nicholls: If you look at the government’s stated objectives, which are still its stated objectives. The first is economic growth. Pre pandemic, we were growing at 5-6% year on year. We might not be bright shiny tech growing the fastest, but we are from a stable base of 140 billion pound of turnover, 6% on top of that is quite a lot.

The government also wants 80% employment. And we are the route through for lots of people, particularly that 9 billion who are on welfare or not in education and employment a route through for them. So they still want 80% employment, but they’ve just made it much more difficult and much more expensive to be able to employ people. These are people who need to work flexibly and part-time because they’re coming off long-term sick, they’re disabled, they’ve had a long time out of the workforce, or they might have caring responsibilities.

And the third one is they want to invest in the high street and want regeneration in the high street. And we are the businesses that are at the heart of the high street. And now we don’t have that capability to do that CapEx to invest. So if the government wants to achieve its ambitions, it needs to support us. But all of those moves that you talked about in the budget have just made it immeasurably harder for us to be able to do that.

Clinton Anderson: It sounds like the government should be listening to us more often and more frequently, which I think we’re going to talk about later in our conversation.

Before we move on, there’s one more topic on this impact question I want to get to. I’m gonna come back to you Dawn, because from an operator’s perspective, what are some of the things you’re doing or you’re seeing your colleagues do to mitigate or manage this big impact on profit and this big impact on cost? What are some things that you’ve employed? Strategies and operational techniques?

Dawn Browne: We have been doing this for a number of years. These aren’t knee jerk responses to April.

Clinton Anderson: It’s not your first rodeos we’d say in Texas!

Dawn Browne: Although we were pretty surprised by the level of what we’d got to cope with. For years we’ve been thinking about how we spend every pound, but in Fullers particularly, it’s a difficult balance because if you find yourself in a race to the bottom, you know what Kate said earlier, what you’re delivering is service. What makes you stand out from your competitors is service. What is the experience that you deliver? And if you take out all the elements of cost that you possibly can from that, you just find yourself in a race to the bottom, and your customers don’t want to come to you for that experience.

Clinton Anderson: I think we call that a doo loop, right?

Dawn Browne: It’s particularly challenging. Our biggest cost, is the same for most hospitality businesses, are our people.

Clinton Anderson: So typically, what about 30-40% of your total cost?

Kate Nicholls: No, 35% of total turnover of revenue, around 55-60% of total costs.

Dawn Browne: And that’s gone up significantly in the last five years. I think it’s gone up by 4 or 5% of turnover in the last 5 years.

Clinton Anderson: Eating up a significant portion of what has historically been the profit that would allow for investment, allow for growth and turn it from a doom loop to one of those virtuous cycles where investment begets more investment because investment creates success.

Dawn Browne: And one of the challenges you’ve got to grapple with, is what do you invest in your people over and above the wage that you pay them? Because the pressure is going come even more on as the wage that you pay them increases. What about the things surrounding that?

So for example, we provide a healthcare cash plan to all of our team members, which allows them access to a 24/7 online GP, because it’s really hard for them to get into their day. So some of the things that we’re doing are supporting society in general, and the question will be can we continue to afford to do that as the minimum wage goes up? So it’s that really fine balance.

We have for years invested in the training and development of our people. More than 60% of our managers are homegrown. More than 50% of our chefs are homegrown. We invest a lot every year in growing our people.

Clinton Anderson: It’s not just a first job. It can be a career path.

Dawn Browne: Absolutely. It can be a career path. It should be a career path.

And how much of that can you continue to do? So thinking about that has been a really challenging topic for us because it’s really helped us in a labour crisis we did okay because it had been a point of differentiation.

Clinton Anderson: I had not even thought about this as an impact, because I think we talked earlier about when taxation eliminates profitability in the sector. We talked about a decrease in innovation, a decrease in store expansion. But you’re highlighting a third issue here, which I think is critical, which is investment in our people. Which if there’s no profit we can’t invest in training and development. It’s so critical to helping people move up in their careers to bigger jobs, higher pay, more steady work.

Dawn Browne: We were talking about pre the podcast about the different generations in society now, and the newer people entering the workforce have different expectations. They have an expectation of ours as an employer to be supportive, to be parental, to be caring in a way that I didn’t have the expectation when I joined the workforce, but those are the things they expect. And in current society, I sort of don’t blame them that they’ve got those expectations.

But how do we afford to meet those? How do we afford to invest in our people when we are exposed to such a high rate of tax around our people?

Clinton Anderson: I think we’ve done a good job in stating both the challenge and its impact on our industry. If we think about some of the solutions, Kate, you referred to us as, bright, shiny tech. I like that! We are represented by Ally on our panel today, who works very closely with our HR and payroll offerings in our business.

Ally, how can technology help our customers, restaurant operation and other hospitality players deal with this rising cost?

Ali Barlow (Guest: HR & Payroll Product Manager, Fourth): It can help in many different aspects. So from a payroll perspective, having a product that is updated automatically. It takes that whole pressure of payrollers or payroll finance departments having to go out and learn and decipher the complicated legislation that comes out, by putting it into a tech platform that just does it. Coupled with articles, webinars to help operators to utilise that technology. It takes that edge off, so they’re confident and reassured that they are doing things legislatively.

From a HR perspective, it is getting the right people recruited, having technology like applicant tracking platforms, and programmatic bidding, there’s so much out there that will just get those job adverts out to the right people in the right place.

The generational differences now, I would use to go online to Indeed or recruitment consultant offices to find a job. But now they tend to go on things like TikTok, and having a job advert just pop up at the right time, maybe when they’re commuting, when they’re on the way to college or university. Just having the information right there, at the right time, would just get those people in.

And streamlining that whole process from application to having a job, to being available on the system and available to work. Branded to make it like they’re part of that company from the very, very beginning, just gets the right people within the business.

Clinton Anderson: So curiously, people become more important than ever because there’s not gonna be constraint on how many people can hire.

We see this in our data, right? We serve about 120,000 restaurants around the world, and one thing I like doing is to see how our systems are being used and how many people are being scheduled. And what we saw during COVID and as a legacy effect of COVID, and we’ve even seen more in the UK with the new tax regime, is operators using fewer people working more hours. And so there’s a constraint. There’s less flexibility. It’s harder for operators to be able to fill in the peaks and valleys of demand. And they’re asking people to do more with less, in terms of the workers.

If you think about being a manager, I would argue that managing a store, managing a restaurant is one of the hardest jobs in the UK, or anywhere in the world. Because you’re asking someone to be experts at so many different things. Experts at hiring, experts at marketing, experts at reading a profit and loss statement, experts at being able to deal with the customers, training and developing experts at forecasting experts at staffing and building a rota.

And so all these things combined make it a really hard job. And now if you’re asking to be expert on legislative and regulatory requirements, trust the system to know you’re doing it well.

Second, make sure from a recruiting perspective, make it easier to bring people online, make it a branded experience.

I think there’s a third one which is, from a technology perspective in terms of the systems you’re using to communicate to those team members and to build the schedule, to staff the teams, is efficient as possible, allowing people to pick up, drop and swap shifts. Because you’re putting more strain on your labour base. And with strain on the labor base, anything you do to make it easier to decrease the friction for them to be able to pick up their shifts and work their shifts, I think is really important.

Kate Nicholls: I think it’s what Dawn was saying earlier as well if you are in an intense cost pressure environment, you’ve gotta make every pound of revenue count. And you’ve gotta match it.

That’s what the government is trying to move the economy to do. It’s just having a disproportionate impact on hospitality, but they’re trying to make it be more productive.

I think we’re always going to be a people business. There are lots of operators that are cutting headcount or that are cutting hours, but actually the smarter operators are using tech to be able to match supply and demand and get their labour rota and scheduling as productive and as efficient as it can possibly be. And then having that flexibility to be able to add people in. Because suddenly if the sun shines on a Saturday, you’ve got more people coming through. If it rains, we’ve got brilliant weather at the moment, but if it rains on Saturday, you’re not gonna need to be fully staffed. And it’s being able to be as flexible as we possibly can. And if tech can help us do that and free up people to do what they do best in the store, which is not doing the back of house, but doing the front of house service.

Clinton Anderson: Our dream is empty out that manager’s office. Get them out front. The only thing a manager can do uniquely is train the team and ensure a quality guest experience with that team.

So that’s where we think technology has a big role, which is create that ability to flex and manage the unseen events. It’s not saying tech ever replaces a human, it’s how do I use technology to make that human more effective?

Kate Nicholls: You can make the informed decisions about what you’re needing to do. And that’s where we need a light touch, both from tax and regulation and legislation. And I know we’re gonna talk about the employment rights bill, but that’s where this could all go horribly wrong if we don’t get that right. Because you will remove some of that flexibility that people have got.

Clinton Anderson: Ironically, you’re doing things that make life harder for the employee.

Kate Nicholls: And also make it harder for the employee to do what they want, which is have a flexible work-life balance, or life work balance is how I prefer to phrase it, which is what we offer in hospitality. So that you can fit it around your other commitments.

Clinton Anderson: It’s a shape that fits many people who otherwise couldn’t work in a normal situation.

Kate Nicholls: Absolutely. And what we’re going to see if we push it too far is that those people will not have those opportunities. They will step away. It’s not employers that will make these decisions on people.

Clinton Anderson: Putting more pressure on unemployment and then on welfare as well.

Kate Nicholls: Absolutely. And also reducing the tax take. We are the most heavily taxed sector of the economy. 75% of our profits go back to the government in tax. 54 billion. It funds the entire police and security budget.

Clinton Anderson: That is a large number, 54 billion. Remember that folks who are listening, that is a very large chunk of what you said 75% of profit. Right?

Kate Nicholls: A large chunk of that comes from people, it’s employment taxes, it’s property taxes. If you make it more difficult to be a property intensive and a labour intensive business, you will reduce your tax stake. They’ll be more productive. There’ll be more efficient as a sector. But actually investing in people in place is what you to do.

Clinton Anderson: I got to be the contrarian for a minute. I’ll be the skeptic, hey, you’re just talking about how to make restaurants more profitable. What about the employee? You talked about the Employment Rights act. And it’s coming. It’s going to have an impact on operations. How do we strike that balance?

If we think about the customer’s needs, the operator’s needs and the employee’s needs, how do we strike that balance?

And Dawn, I’m going to come back to you first. You live in the world of people in the operations and leading people teams. How should we strike that balance? How do we find a way that makes it work for everyone involved, all the constituents?

Dawn Browne: We’ve been doing this for a long time. It’s not rocket science to all of those people that work in hospitality. Happy team is happy customers is more money in the till. So if you get all of those things right, everybody benefits. You don’t have to trade one off with the other. We’ve been doing that for a long time.

I think for me the challenge with the Employment Rights Bill coming and getting that right is twofold. It’s firstly about making sure that whatever we do is really thought through carefully. Because if you’re not careful with that Employment Rights Bill, you negatively impact the people as well as the operators.

So let me give you an example, if you say there’s a 12 week reference period. So if you’ve worked for me for 12 weeks and you’ve worked across those 12 weeks, an average of 30 hours, I may have an obligation that says I now need to offer you a 30 hour contract. And the government’s view on that is that will give you more stability. If my business is seasonal and I can’t possibly give you 30 hours contract. What am I going to do? I’m gonna give you a fixed term contract for that time, which actually gives you less stability, less reliability. It’s going to have unintended consequences.

Clinton Anderson: This is a recurring theme. I’ve heard this come up multiple times in our conversation where sometimes the government’s intentions to drive a certain outcome, if not careful, if not deeply consulted with the industry, ends up with legislation having the opposite effect of what’s intended. It actually hurts labour, hurts flexibility, and makes it hard for people to work the way they want to work.

Kate Nicholls: And crucially doesn’t make it better for our workforce and our team. Because that example that Dawn just gave, if you are a working mom or you are a student and you’ve come out of that busy period, that’s great you’ve had lots of work, but actually you might not wanna work for the next two months because you’ve got a major dissertation that you need to put in as a student.

You don’t want to have to be taking 30 hours. And if that’s the choice, you may, unless it’s handled very carefully, find that people step away from the workforce altogether because that doesn’t work for them. In both cases it’s either we will be offering temporary fixed term contracts, or they will be choosing temporary fixed term contracts. And they lose their protection.

When I started in the industry, 25% of our workforce were on temporary seasonal contracts. They had no employment protection throughout the rest of the year because they were just employed for a Christmas or a summer season. It’s now down to 8% because we work with good quality, flexible part-time or zero hours contracts that protect the workers, give them rights throughout the year.

Clinton Anderson: The best of both worlds.

Kate Nicholls: Yes. When we did a survey, 90% of the workforce are actively choosing them because it meets their needs and it allows them to flex their conditions. Because the big thing about a zero hours contract is as the employee, you have the right to say no. I’m not coming into work for the next two months, three months, I’m not doing that Saturday shift.

Clinton Anderson: So this is one of those situations where one size doesn’t fit all.

Kate Nicholls: One size doesn’t fit all. And you need to handle it really carefully because otherwise the government’s legislation will cut across what is good employment relations, which is negotiation and discussion at a site level with your manager and team, to be able to get something that works for all.

Clinton Anderson: I hear a theme about flexibility and choice in your words. You’re both emphasising this point, which is one thing that’s unique about our industry is the fact that we’ve provided flexibility and choice, which allows people who are looking for that type of flexibility, given their own personal needs in their life, to find a place where they can thrive and meet their financial and personal needs.

Kate Nicholls: And I think sometimes there is an assumption coming through from government because it’s looking at all industries. All sectors that zero hours is not what people are looking for. Everybody would want to have a permanent long-term fixed term contract that is 30/40 hours a week. And actually that’s not what people are looking for. And it’s not what the businesses are looking for. I mean businesses would love it. I mean, imagine how easy your labor scheduling would be a guaranteed contract that they were 30 hours a week and you could tell them when they were turning up for work?

Dawn Browne: It doesn’t work that way.

Kate Nicholls: It doesn’t work that way. And the assumption from government that that’s the ideal way it should work just misses the point.

Clinton Anderson: It’s funny how we always have to train people who come into the industry, which is we are not like other industries. If people came in for meals from nine to five Monday through Friday in equal numbers, this would be easy. But this is not the way that people choose to experience life.

Dawn Browne: But people come to us for that reason. They come and get a job in hospitality because they can choose. Because they can say, I have caring responsibilities I can only work breakfast shifts. I have other responsibilities: I’m studying, I’m learning, I’m going to be a musician, I’m going to do this, I’m going to do that. Because they can say to us that week, we don’t want to work anything thank you for doing something else.

Kate Nicholls: This is where government needs to stop looking at industries and employment in purely an economic productivity lens. Because that’s what they’re looking at. We could improve our productivity in hospitality. It’s always considered to be low, but it is because we’re labor intensive. They need to start looking at us being a socially productive industry because of the support we provide. 85% of our managers don’t have degrees. We’re a real tool of social mobility.

No other sector can take you from entry level, no experience (not no skills), to management in under two years and managing big sites with £50,000/£60,000 pound salaries that go alongside it. Nobody else does that.

Clinton Anderson: We even see it in our technology business. Where we have a number of team members who came up to the restaurant industry, migrated to tech and are now leaders in our business. And they started with entry level jobs in restaurants.

Kate Nicholls: The Government needs to value socially productive jobs, socially productive sectors and get a legislative framework that works for both sides.

Dawne Browne: I think that’s one of the other challenges if we’re not careful with the Employment Rights Bill for hospitality. So clearly one of the challenges is around the zero as contracts and the perception that they’re bad for our employees, which they’re not. But the second thing is about day one workers’ rights. And my concern about day one workers’ rights is it stops without the right probation and all those kinds of things built into it, is it will stop employers taking a risk on employees. And that worries me.

Clinton Anderson: That means less employment, not more employment.

Dawn Browne: It means less employment and it means less employment for the people that really need it and for the people the government are trying to get back to work.

Clinton Anderson: Isn’t that one of the key takeaways from our conversation today?

Dawne Browne: If you’re an employer and I say to you, would you like to take this person who’s got experience working in a bar, they’re 25, they’ve worked in a bar for four years, no problems. Would you like to take this person that’s been out of work for five years on long term sick? What are you going to take? You’re going to take the person who’s got the previous experience, and that misses out for society. I worry that broadly as an industry, we’re going to stop taking chances on people that we always have done in the past.

Kate Nicholls: We are the supported pathways into employment for those who are furthest from the labour market who need somebody to take a chance on them. And legislation that decreases the flexibility of employment and increases the costs of employing those people is the worst of all possible worlds.

Clinton Anderson: Because it puts up a wall. Government thinks it’s putting up a barrier to keep people in, but all it’s actually doing is keeping people out of the workforce either because to your point, it increases cost and decreases flexibility. One of the key takeaways from this conversation for me today is that flexibility matters both for employer and for employee. It’s as important for the employee who needs that flexibility, who wants that flexibility and is choosing that flexibility as it is for an employer.

Kate Nicholls: You make it more risky for the employer to take a punt on that person, but you also increase the risk for that person to come off their benefits and to make that first step and to try because it becomes much more complicated and the demands on them are so much greater.

So you remove that tool of social mobility and you remove that powerful force for good that we can possibly be. And the two together just become too challenging for many operators to be able to deal with.

Clinton Anderson: So we’ve clearly laid the groundwork for government needs to be careful or they’re gonna have an unintended consequence that actually has the opposite of the intended effect. The benefit they’re hoping from regulation is not going to materialise. In fact, it’s gonna be the opposite effect.

Let’s imagine that we can get the chance to really get consultative with government and the folks who are running these regulations. In the next 12 months what would you like to see if you? What are the messages you’re sharing with government that you want to be heard, and that you think will have the biggest impact? What would you like to see done in the next 12 months?

Kate Nicholls: Pause, consult and take time to get it right. Rush legislation is bad legislation. When the last labor government came in in 1997, they took two and a half years to get the National Living Wage right. They worked in a tripartite structure with unions, employers, and government to make sure the detail was right so that when it came, there were no nasty shocks and surprises. And the legislation was clear and workable, and easy to implement. We are not in that situation at the moment. And the thing that links the two together, businesses can’t cope with economic shocks and surprises. And when you do have that, which is what happened with the NICs change in the budget, you remove and reduce trust. So the government at the moment is saying to industry, trust us to get the piece of this legislation right. It’s like a book at the moment. It’s got a spine and it’s got covers. It’s got no pages in the middle because it just is enabling legislation that says government has the power to legislate in this area. Trust us, we’ll get it right.

Clinton Anderson: Which makes all nervous maybe?

Kate Nicholls: Yes. We might have been nervous in the first instance, but you pull a stunt like the national insurance changes, surprising everybody. And funnily enough, business doesn’t trust you to get it right. So government needs to start talking in detail now about how they will work to get that legislation sorted. How they will get the consultation working, how does it work?

Clinton Anderson: Consultation and collaboration can be critical for winning back that trust as I think we’re all a little nervous right now.

Kate Nicholls: Absolutely. And I think it’s starting from a start point that not all flexible employment practices are inherently bad and employers are not inherently bad. Because if you regulate for the bad apples and there are businesses out there that don’t treat their staff fairly, but if you legislate for that, you will gold plate everybody and you will remove any of the flexibility that good employees need to be able to deliver for their workforce.

Clinton Anderson: And what Dawn has established is that many good that the employees wanted as well. This is a win-win in my mind.

Dawn, what would you want to emphasise?

Dawn Browne: So I would agree with Kate, real listening, real collaboration really open to creating this together in a way that will benefit everybody.

I would also advocate a bit more listening to our employees. This legislation is meant to benefit our team members. It’s meant to benefit the people that work for us. And my significant worry is it won’t. The national insurance hike, it isn’t benefiting the people that really need it the most. And so more listening to business, but also more listening to our team members, and real collaboration and early collaboration. I think that my experience of the last few years of new legislation has been, it arrives late, the detail arrives late. You (Ali) must find that in your world of suddenly you’ve got a system to change.

But if you’ve got five and a half thousand people to take care of, like we have, you want them to have good notice of any changes you’ve got to make. You want them to feel part of the process. We like to involve our team members in what the future of their work will look like. Well if the guidance for the legislation arrives five minutes before you’ve got to put it into practice. You haven’t got a hope of doing that, so early detail.

Kate Nicholls: Early consultation and detailed and take time to get it right. And then maximum notice before the changes take effect.

The other part we haven’t talked about in that package is unfair dismissal and the changes of notice period. It’s currently two years, it’s going down to nine months that is gonna need us to train all of our line managers in how to manage their staff and have conversations with their staff around performance management. So you need time. You can’t have a six week notice period or a six week leading period. You need to have a good notice period for those changes to take effect.

Clinton Anderson: So we appreciate good government and their efforts to have positive impact. But I think what I heard here is flexibility matters both to the employer and the employee. Early consultation. Lots of heads up on what’s coming and getting that consultation not just from employers but also from employees, from the workers, to really understand what’s going to benefit the entire industry.

Kate Nicholls: And look cumulatively in the round. Because Dawn’s right, it’s the cumulative impact of all the regulations. Look smarter across government. If you want us to prioritise paying our people and paying our NICs, you need to look at all the other areas that you’re talking to us about: tourism, taxes, packaging taxes, food regulations. The businesses are really heavily regulated.

Clinton Anderson: Our Industry probably has as many burdens as any in the entire UK sector from ingredients to labour laws. All these areas are pretty onerous.

Kate Nicholls: 70 regulatory regimes and regulators who touch on our businesses, a local, national and regional level.

Clinton Anderson: That feels heavy, doesn’t It?

Kate Nicholls: Yeah, the hand of the hand of government falls heavy. They could look creatively across those other areas. They could give us a breathing space in other areas where they are looking at legislation, looking at it in the round on the cumulative effect. There’s also some creative stuff that they could do more quickly in the people space.

Reform of the apprenticeship levy is promised. We are the back of the queue for getting some of those foundational apprenticeships and swaps coming forward. Put us at the front of the queue, give us a break. Disproportionately hit by NICs, give us disproportionate access to the good stuff that is coming that would help us to invest in those people, and make it easier to do.

And then look creatively at NICs you get no NICs if you employ somebody under 21, no NICs, if it’s an apprentice under 25. Could you look at doing something creative around NICs for older apprentices? For long-term sick? For long term unemployed coming back in, an incentive to get people back into work.

Clinton Anderson: Which is of course the government’s ultimate goal to get people back to work.

Dawn Browne: I think we have an obligation as hospitality. I completely appreciate our challenges for government. But I think we are a sector that is collaborative. We are in it together a lot of the time and I think we have got an obligation as the hospitality industry to contribute to the consultation. To get round the table to work through organisations like UK Hospitality so that we are heard. It’s very easy as a busy operator or people director to think I’m not sure I’ve got time to go through the detail of that consultation. I would urge the hospitality professionals listening that it is worth time to do that. It is important that our voices are heard. It’s really important.

Kate Nicholls: Also the power that we have to sit around the table. Because this is happening. Government is talking to us on a regular basis. It often happens behind closed doors while they try and work through and get the information from us and stress test stuff. We are in there talking and trying to influence this legislation. But the power that I have sitting around that table comes from the number of members that I have.

If you want to have it easy or you want to know what the consultation is saying, you want the inside track, be a member of UK hospitality or other trade body, we will do the heavy lifting for you. We’ll provide you with the information and insight and will make your life easier for responding to the consultations.

Clinton Anderson: Makes a ton of sense. We need to be committed and collectively committed.

So I think government’s had some good practical advice. We need them to continue to listen. We need to continue advocates and voices in the industry to continue to push hard for the benefit of both employers and workers. Because we all want to deliver an amazing guest experience for our customers.

I think our listeners have been well fed today. Thank you all three of you for being here. Dawn, Kate, appreciate you taking time out of very busy schedules to be here and share your expertise and insights and I know I learned a lot, so thank you very much.

Kate Nicholls: Thank you for having us.

Clinton Anderson: Take care.