Increase in the minimum wage and seasonal business. How do entrepreneurs cope with rising employment costs?
The second increase in the minimum wage this year is being felt by the owners of seasonal catering, service and entertainment outlets. Especially since it was introduced just before the peak of the holiday season. On the one hand, entrepreneurs have to deal with a shortage of employees, and on the other hand, with rising labour costs and wage pressure.
The July indexation of salaries is not large. However, compared to last year, the minimum wage increased from PLN 3,010 to PLN 3,600 gross, and the hourly rate was raised from PLN 19.70 to PLN 23.50 gross. In addition, the high dynamics of the minimum wage growth drives wage pressure from other employees. This is taking its toll mainly on small entrepreneurs, for whom employment costs were already a considerable burden. Financial plans are also modified by companies that need a relatively large number of less qualified employees.
“The costs of hiring an employee have been increasing exceptionally often in recent years. In the past, the rate was changed once every few years, this year we have already had two indexations, and more are planned for 2024. This may result in the need to cut costs, reduce employment or even restructure workplaces. In addition, when employees in the lowest positions receive a salary increase, other employees also expect it. This is how the wage-price spiral is driven – says Sylwia Kutermankiewicz, Director of the HR and Payroll Department at LeasingTeam Group.
Holiday appetite for pay rises
The holiday period is a rash of offers related to tourist service, mainly in seasonal gastronomy, hospitality, trade and services. The influx of refugees from Ukraine, mostly women, who quickly found their way in these industries, turned out to be a significant support for tourism-related businesses. However, there is still a shortage of workforce in this sector. According to current data from the Ministry of Family, Labour and Social Policy, unemployment in June 2023 was 5%, maintaining an uninterrupted downward trend. This means that virtually everyone who wants to work is employed somewhere. In addition, employees who have a slightly higher salary than the minimum wage more and more often decide to change their employer or position.
“The average salary in the catering industry oscillates around PLN 4,200 gross. Therefore, it is beginning to be perceived as not much higher than the minimum wage, which fuels employees’ appetite for pay rises. Entrepreneurs running restaurants, bars, but also guesthouses or even hotels have to face a kind of price battle. Owners compete with each other, often offering slightly higher wages. This, in turn, generates high turnover, and the need to onboard employees and train them again and again is a considerable burden for employers – says Michał Czernek, Senior Business Development Manager at LeasingTeam Group.
Entrepreneurs are trying to fill staff gaps by employing pupils or students up to 26 years of age, who are exempt from income tax, and under a contract of mandate also from the obligation to pay social security contributions. Employment on the basis of a temporary employment contract is also becoming an increasingly popular solution.
– As the name suggests – this is a contract that is by definition dedicated to seasonal, i.e. temporary, work. This form of employment includes employment under an employment contract as well as under a contract of mandate. A temporary employment contract is a kind of “overlay” on other employment relationships – explains Oliwia Szopa, lawyer, trainee attorney-at-law at LeasingTeam Group.
Employment contract or mandate?
Seasonal workers therefore face the dilemma of whether it is worth applying for employment under an employment contract or, on the contrary, aiming for employment under a civil law contract. As experts argue, in order to earn incidental student earnings, a contract of mandate will be purely economically beneficial, where the net amount is the same as the gross salary.
“The commonly accepted absolute advantage of an employment contract over a civil law contract in the case of seasonal work is clearly decreasing. Holiday work is supposed to last a few weeks, maybe months. In such a short period of time, it is difficult to acquire any special employee rights, including those affecting the durability of employment. Naturally, the advantage of an employment contract is holiday entitlement. Again, however, the question arises – do we establish a short seasonal employment relationship in order to go on vacation during its performance, or rather to simply earn money for this vacation or other future expenses? – asks rhetorically Oliwia Szopa, lawyer, trainee attorney-at-law. “In order to achieve the goal of simply making quick, incidental earnings, we should be guided by the assumption that the lower the taxes and social security advances, the better for the person taking up employment ,” he concludes.
Pensioners and minors as an opportunity
There are many reasons for the insufficient number of seasonal workers. Currently, we are dealing with a large mismatch in relation to vacancies. Changes in the structure of professions were caused primarily by technological development. The demographic winter that has been persisting for many years only intensifies this phenomenon. According to experts’ forecasts, the staff gaps may be partially filled by pensioners who, due to high inflation, are increasingly looking for an additional source of income. The indexation of the minimum wage may be an additional incentive for them to return to work, even part-time. Entrepreneurs are also increasingly employing minors for holidays.
“Employee turnover during the holiday season, for example, is beginning to be dealt with in an interesting way, for example, by amusement parks. Programs for employing students over 16 are becoming popular. Thanks to the lack of contribution burdens and often the cost of living, high school students are willing to accept summer jobs for the minimum wage. Of course, they cannot perform a number of jobs, focusing on cleaning or catering roles. However, the savings generated in these positions allow employers to retain other employees, responding to their expectations regarding pay rises – sums up Michał Czernek, Senior Business Development Manager at LeasingTeam Group.
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