High turnover and shortages driving up labour costs – MEA study

A survey from the Malta Employers Association has suggested that, whilst there are many variables that affect the revenue of businesses, rising labour costs due to high turnover, shortages and increased property and renting prices seem to be the main driver.

The MEA conducted a survey among more than 400 employers with companies of various sizes and sectors.

The association explained that skills shortages and a reliance on foreign labour to meet demand is partly creating the situation the country finds itself in.

77% of companies surveyed stated that they anticipate that the rate of increase in labour costs will be higher than 2018, with only 2% saying that costs would be lower - all coming to the reality that 74% of respondents said that labour costs are affecting companies' competitiveness.

This in spite of the fact that a majority of companies (34%) have increased their wages by more than 8%, with a further 26% of companies saying they've raised wages by 5%.

Company employee composition and turnover showed similar worrying statistics, with the average labour turnover per annum in the last three years being very high - specifically a third of respondents said that the number of employees leaving in the past year exceeding 20% of their labour force, when this was normally expected to be around 5%.

62% said that this turnover rate was higher than it has been in previous years.Continues on page 2 >>

A trend that did not help them in the slightest was that, apart from the fact that 30% of the work force in Malta being non-residents, many would only stay on the island for a few years at a time sometimes as little as one year.

24% of companies said that the highest rate of turnover was found across all levels of the organisation, with the highest standout turnover rate being skilled workers.

69% are said to have left their job due to move to one with a better remuneration package - and after delving more into the choices with regards to job the decision to move seemed to be focused on a short term financial decision rather than career prospects.

It was also noted by 18% of private sector employers that people were going to work in the public sector, even if this meant earning lower wages - with government resorting to engage persons in a 'position of trust' with a higher remuneration to bypass the official salary scales of the public sector.

58% are employing foreign workers to make up for labour market shortages, and 64% said they are increasing remuneration package

Only 10% reported having people on minimum wage because of the agreement that after first and second years, people on minimum wage would get wage increases.

Whilst the MEA suggested, amongst other things, strengthening identity Malta so that they would be able to keep up with the sheer volume of applications, and a long-term strategy to control the labour pool - the private sector seems to be stuck in a vicious cycle where increasing the labour pool would further increase property prices, which would further increase turnover, which would again cause wage inflation, which would further increase property prices without any tangible increase in their own productivity being created.