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Rising costs, staff shortages threaten Polish security industry

SECURITYRising costs, staff shortages threaten Polish security industry

The significant jumps in the minimum wage for work, coupled with a general increase in costs associated with high inflation, pose a formidable challenge for companies in the security industry. They indicate the necessity to renegotiate contracts with clients to avoid losses. This is the biggest challenge for most companies in the industry, as revealed by the research conducted by the Polish Association of Security Employers. The radical increase in personnel costs, alongside the shortage of staff due to record-low unemployment makes it increasingly difficult for the security firms to recruit new employees, with 80% of the companies declaring significant difficulties in this aspect.

“The most painful cost associated with the security industry are primarily the minimum wage rates. Over the past nine years, they have increased by 147 percent. In 2015, the minimum wage was PLN 1750 gross, while from July 1, 2024 it will be PLN 4300 gross – the increase is galloping, and this directly translates to the rates for our clients. It is the most demanding element we have to valorize annually and practically it is a requirement to continue these contracts,” says Paweł Korzybski, President of the Polish Association of Security Employers to Newseria Biznes agency.

The report “Security industry in Poland 2022/2023” from the Polish Association of Security Employers reveals that the personal and property security sector is a market worth approximately PLN 11 billion, comprising of several thousand entities. The recent years have been a real stress test for these companies—they had to tackle, among other things, the challenging market situation triggered by COVID-19, which resulted in no new contracts, an extraordinary low unemployment rate causing a lack of candidates, high inflation and considerable raises in the minimum wage for work.

“Inflation directly affects the costs of maintaining enterprises in the security sector and also directly generates profitability from a given contract, as it affects indirect costs such as energy, fuel, leading to wage pressure on the part of some employees. What condition is the security sector currently in? I believe that the legislative changes that are in the market in 2024, including the increase in wage costs by at least 20 percent, as well as inflation, which fluctuates within the 6–7 percent range, create quite a challenging environment,” Paweł Korzybski assesses.

According to the association’s calculations, the direct costs have increased by 29 percent over the past two years, of which personnel costs have risen by 29 percent. Indirect costs in 2021–2023 increased by 29 percent. This was due to a raise in personnel costs by 29 percent, an increase in location maintenance costs by 27 percent and an increase in energy costs by 36 percent. It is a great issue for the companies to estimate the scale of electricity price increases for coming months. The PZP security indicates that the costs of financing activities have increased dramatically—by 306 percent. This has a direct bearing on the management of loans, leases, insurances and bank guarantees. All these influence the necessity of renegotiating contracts with clients, which is a significant problem for the security firms.

“Wages in the security industry fluctuate roughly between 92 and 94 percent in the final rate for the client. Therefore, it is a significant cost and must be valorized annually. In 2024, their increase is about 20 percent, as employment contracts have increased by 19.2 percent in the minimum wage, 19.6 percent in the case of specific task contracts, but for example in the case of employees who have a disability certificate, the increase in costs is between 23 and 32 percent. So these costs directly affect us as a security industry having to go to our clients to update financial conditions for 2024, especially as the change in the minimum wage occurs twice,” explains the President of the Polish Association of Security Employers.

For many companies in this sector, reaching a new understanding with clients regarding wages is a prerequisite for their survival in the market. They stress that negotiations are often the only chance to maintain contracts and stabilize the situation, while in the absence of an agreement, they sometimes have to terminate current contracts with clients.

Already in the survey conducted at the end of 2022 among nearly 70 companies in the industry, 72 percent of them pointed to the valorization of contracts as the biggest challenge. Clients using their services were, however, negatively inclined towards raising rates – 64 percent of companies assessed that clients were dissatisfied with the increase in service prices, and 59 percent of companies received information from clients about the lack of budget for this purpose. Meanwhile, 43 percent of the respondents stated that their clients did not agree to a price increase by the minimum wage growth index, which is 19.6 percent.

“Year-on-year increases in the minimum wage allow us to systematize the way we remunerate our employees. Does this have a direct impact on the attractiveness of work in security? Probably so, but we must remember that the minimum wage does not allow us to secure the proper staff composition on our contracts and we have to fight for these employees through appropriate gradations, higher rates or another form of employment,” Paweł Korzybski explains.

The problem for the industry is not only the radical increase in costs, but also the growing shortage of staff, related, among other things, to record-low unemployment. The operation of the security sector largely depends on work performed by people, meanwhile, 80 percent of them currently declare significant difficulties in recruiting new employees. Among the reasons is the lack of people with permission to carry weapons (during the COVID-19 pandemic, the Police did not organize exams granting such permissions).

“The security industry is experiencing quite significant problems in the field of acquiring highly qualified employees, such as those authorized to work with weapons, due to the fact that they require higher rates, employment contracts, which directly corresponds to a higher final amount for the client, and this is the biggest challenge. At the moment, the high possibility of changing the place of employment, the high absorptivity of this market does not allow us for certain stability, and we must, financially or non-financially, through appropriate benefits, take care of our current employees, ” emphasizes the President of the Polish Association of Security Employers.

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