Jubilee Group CEO Alex Scicluna has stressed that the catering industry’s reliance on foreign workers has come due to “very few” locals wanting to work in the industry, with many not wanting jobs serving others.
The Maltese Islands’ catering industry has long been maligned due to the wages paid to its workers, with many who left the industry during the pandemic claiming that it was the low wages and irregular hours that prompted a labour shortage within the sector. Consequently, and like what can be seen in several sectors in Malta due to a shortage of workers across the board, restaurants are having to pay higher wages to recruit talent, often turning to third-country nationals (TCNs) to plug the gap and sustain their operations.
These issues have prompted catering establishments to spend 26.6 per cent of their total sales revenue on salaries and other labour costs, a survey by the Association of Catering Establishments (ACE) recently found. This is the most substantial expense, with raw materials (20 per cent) and beverage costs (17.4 per cent) coming in at second and third place, respectively. ACE stated that restaurants, take-aways, bars, kiosks and other catering establishments take in an average of just 6.1 per cent of total sales revenue as profit.
Reacting to these results, Mr Scicluna, who is at the helm of Jubilee Group, the company that owns and operates establishments such as Café Jubilee, Murella, and MOOR, among others, told this newsroom that Malta’s catering industry has been under this pressure for various years.
“It has been the case for quite a long time that such financial stresses have been piling on the catering industry, but everyone turns a blind eye because the general consensus is that the service industry is ‘robbing its clientele’ and ‘everyone is loaded’,” he said.
He acknowledged that this mentality is clear for all to see through social media comments, as people compare prices they see in supermarkets to the ones charged at restaurants and “wrongly deduct that the difference is profit that goes in the owners’ pockets”. Contrary to this belief, the service industry is “one of the most labour-intensive industries that there is”, and together with cost of sales, labour costs absorb a “large chunk” of sales revenue.
Through its widespread portfolio of restaurants, Jubilee Group has a significant presence across the Maltese Islands, with a number of establishments being located in Gozo.
When asked whether there is a sharp difference in labour costs between Malta and Gozo, Mr Scicluna pointed out that wages are “more or less equal” for the same skilled workers.
He noted that shortages are present in both islands, and have been an issue for around 10 years, with some worse than others. However, they tend to be “worse” in Gozo due to the fluctuation between summer and winter business.
“It is impossible to hold on to a core team of full-timers all year round in Gozo because if you do so, the business will work at a loss. Very small businesses in Gozo have an advantage over medium-sized ones because the owners or owners’ families can make up for shortages during busy periods,” he remarked.
“For larger businesses, one either gears up for these periods with the possibility of eroding any profits in summer over the winter period, or be left behind,” Mr Scicluna clarified.
One of the other issues highlighted by ACE is Malta’s high VAT rate. At 18 per cent, the rate is among the highest in the Mediterranean region, and has continued to contribute to the narrowing down of caterers’ profit margins. ACE President Michelle Muscat stated that it would be “far more sustainable” if the VAT rate is lowered.
Mr Scicluna was in agreement, stating that the present VAT rate is a “concern”. He noted that food is bought with a zero per cent VAT rate, only to be sold at 18 per cent, thus shifting “all the brunt of VAT” to the service industry providers.
“Everyone thinks that the price shown on the menu is all kept by the outlets, but that is not the case,” he remarked.
Additionally, Mr Scicluna said that many who criticise restaurants will “start wagging their tails”, highlighting the black economy – establishments which do not pay VAT – that is often associated with the catering industry. He added that restaurants are branded as the “worst offenders” in this aspect in Malta.
Opposing this view, Mr Scicluna emphasised that such people should ask themselves whether they pay by cash or card whenever they go out to eat or stay in a hotel. “I can guarantee that 95 per cent or more would answer with a credit card,” he added.
“Between what one thinks and what actually happens, there is a huge difference, but few dare to actually analyse the situation properly,” he continued.
Asked whether the local catering industry is operating sustainably, Mr Scicluna uttered that this is not the case as there are “a lot of people that open establishments for other reasons other than to actually try to create a self-sustained operation”.
Returning to the problem of staff shortages, Mr Scicluna highlighted that it is a “very complex issue” that tends to be “misunderstood” by the general public. Calling upon mainstream and social media sentiment, he remarked that the consensus is that cheap labour is brought to Malta to the “detriment” of local employees, a view that he said “could not possibly be further away from the truth”.
“We have been in the industry for 28 years now and we still remember a time when 100 per cent of our employees were local. Over time, this started to change with the 100 per cent being divided between local and foreign workers until we have reached a stage now where we nearly have 100 per cent foreign workers,” he explicated.
Contrary to popular belief, Mr Scicluna said that this is not because foreign workers want lower salaries, as when such workers have been in Malta for a year or so, there are others that “try to poach them” with pay rises. He added that many are aware of what the average salary rate in Malta is.
Over recent weeks, Government has confirmed that there has been a policy shift in a bid to reverse Malta’s reliance on TCNs. Businesses who depend on bringing in a countless amount of TCN workers will no longer be tolerated. This has prompted reactions from business leaders who feel that the rise in foreign workers is the result of a “tight labour market” and an “unsustainable economic model”.
“Why don’t we simply accept the fact that very few local people are inclined nowadays to do these kind of jobs for various reasons that we ourselves have created? For example, working as a waiter is still considered as a shameful job because in our mentality, we don’t like to ‘serve’ others,” he mused. While locals worked in the catering sector in the past, he said that this was mainly for financial reasons, as nowadays there are alternatives and more opportunities.
“Why don’t we accept the new reality and welcome foreigners who are actually proud to do this kind of job?” he said, before stating that this scenario has been around for decades in more developed countries, and it is “part and parcel of the service industry fabric”. Mr Scicluna emphasised that it is tied with the progress a nation makes.
Mr Scicluna also sought to clarify the link between rising menu prices and staff wages, saying that restaurateurs are “all in favour” of just and higher than average wages due to the “nature of the work”.
“However, the same people slamming restaurants for paying peanuts also criticise food item prices,” he said, stressing that the two go hand in hand.
“Higher wages mean higher prices, however some people believe that money is created by just waving a magic wand and it appears out of thin air! Very few actually take the plunge and put their money where their mouth is,” Mr Scicluna concluded.
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