The recent statement by Minister of Tourism Gari Cappelli regarding a 30 percent salary increase in the hospitality sector has shocked the entire tourism industry. Reactions are mostly negative, although there are some who support such a recommendation, but only after tax reforms.
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The most significant criticism of Cappelli’s statement came from Bluesun company owner Jako Andabak in an interview with Jutarnji:
“His statements are completely out of place, and I do not understand where he gets such ideas. Employers are very much interested in increasing their workers’ salaries, and various do-gooders should rather think about ways to fix the overly expensive state instead of talking about salaries. Income certainly needs to be increased, but it is incomprehensible that someone who knows nothing about business speaks about it in such a general way. They should rather take care of the state administration that is destroying us all.”
Hoteliers have, but do not give
We cannot ignore the fact that in recent years, net profits have grown by over 20 percent, while labor costs have remained the same, says Minister Cappelli.
The message that the minister conveys to employees in the hospitality sector is very dangerous and creates confusion in an already shaken sector that is struggling to find workers, believes Ivan Sabljić, president of the Employers’ Association in Croatian Hospitality.
“I don’t know what to say; that statement is at least strange. To declare in the heart of the season that hoteliers should increase salaries by 30 percent at once can only lead to chaos in a sector that is already struggling with a labor shortage. The minister is actually suggesting to our employees that hoteliers can, but do not want to increase workers’ salaries, which is not true and is not good for the sector.”
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Sabljić states that the issue of increasing workers’ salaries should be part of a larger package that includes discussions about tax relief, reducing certain levies, and of course improving working conditions for employees.
A salary increase would lead the sector into losses
Hoteliers have invested profits and thereby created conditions for opening new jobs, claims Sabljić, and consultant Sanja Čižmar agrees with him, stating that according to her calculations, a 30 percent salary increase in hospitality would lead the sector into losses.
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“Namely, gross personnel costs in 2017 in the sector amounted to almost 6 billion kuna, while the consolidated profit was less than 1.5 billion kuna. A 30 percent increase in personnel costs amounts to 2 billion kuna, which suggests that the sector would again fall into losses after operating positively since 2015, albeit with low profit margins. It is significant to note that even in 2017, personnel costs grew faster than the total revenue of the hospitality sector, and profits grew at a rate lower than the growth of total revenue, where total revenue grew by 10.6 percent, while personnel costs grew by 14.8 percent. Profits, on the other hand, grew at a lower rate of 7 percent, which means that hoteliers transferred part of their profits into increasing personnel costs even last year,” says Čižmar for Jutarnji, noting that salaries in the sector definitely need to rise, but that this growth should be tied to tax relief.
