Fair Work in the Hospitality Industry

Executive Summary

Inquiry into Fair Work in the Hospitality Industry

The Fair Work Convention

The Fair Work Convention brings together employers, trade unions and academic expertise to promote and advocate for fair work across the economy and to advise Scottish Ministers on fair work. Fair work is work that offers everyone an effective voice, opportunity, security, fulfilment and respect. It balances the rights and responsibilities of employers and workers. It generates benefits for individuals, businesses and society.

The Hospitality Inquiry

The Hospitality Inquiry was led by an Inquiry Group made up of hospitality employers, employer bodies, trade unions, hospitality workers and other organisations. The Inquiry was led by employer and union Co-Chairs, and was supported by an academic advisor.

The Inquiry Group brought a wealth of expertise and experience to the Inquiry process. The Inquiry considered fair work in the broadest sense, exploring the experiences of hospitality workers and employers to identify what is working and where improvements in fair work can be made.

Satnam Ner, Prospect and Fair Work Convention (Co-Chair)

Linda Johnston, Auchrannie Resort (Co-Chair)

Why Hospitality?

Hospitality is important to the Scottish economy and contributes to the quality of local community life across Scotland. Hospitality is a changing and dynamic sector which offers business opportunities, jobs and careers, and makes a significant contribution to economic activity, particularly in remote rural areas. The hospitality industry is diverse and businesses range in scale and ownership from sole-trader, micro and family businesses to major multinational corporations. Hospitality also comes with a range of fair work challenges which have been a feature of work in the sector for decades. Improving fair work will create positive outcomes for workers and employers. Investing in fair work now will help employers build strong and resilient businesses for the future.

Hospitality – Overview

Hospitality is an important part of the Scottish economy. Accommodation and food services make up an estimated 8% of Scottish employment, almost 9% of private sector businesses in Scotland, and in 2021 had a turnover of £6.4 billion.^[1]

The hospitality sector is characterised by:
- A younger workforce.
- A relatively high proportion of ethnic minority workers and migrant workers.
- A high proportion of part-time workers.
- A high number of jobs with a low level of occupational skills.
Half of all employees work in small businesses employing fewer than 50 people. Small organisations often have fewer resources to create fair work environments. Over a third of employees work in businesses employing more than 250 workers.
This sector is labour-intensive, with labour costs accounting for a comparatively high proportion of turnover. It is also characterised by lower productivity and lower pay. Labour shortages have eased somewhat in the past 12 months but remain higher in this sector than for Scottish businesses as a whole.
The current cost crisis has seen businesses facing higher operating costs. While the debt obligations of businesses have fallen since the end of Covid-19, they have (up until recently) been higher than average.
The basic non-domestic rates (NDR) tax rate remains frozen for a second year running. While NDR relief introduced during Covid has been removed in Scotland, hospitality businesses located on islands are offered 100% relief (capped at £110,000 per business) on non-domestic rates. As a comparison, NDR relief has been retained in England (75% relief) and Wales (40% relief) for all hospitality businesses (also capped at £110,000 per business).
The hospitality sector continues to compete with many EU countries which are still operating under reduced VAT rates, averaging around half of the 20% VAT currently levied on UK hospitality.

The last few years for hospitality have been particularly challenging with the pandemic requiring the sector to close down or significantly reduce trading. This resulted in high numbers of workers losing their jobs or being placed on furlough. Coming out of the pandemic, businesses have faced cost pressures and labour shortages as they have tried to recover. While this created challenges it also created a focus on the value of fair work, as businesses sought to attract and retain workers.