In general, it’s been a bad year for the great majority of companies in Malta and Gozo. The costs associated with the day-to-day running of most business concerns have escalated dramatically and several organisations are beginning to feel the strain. Things have in fact now come to a head, with the Malta Chamber of Commerce and Industry issuing a public warning to government that several hundreds of jobs may be on the line due to the fact that companies are likely to be hit with a double whammy in the coming months – an increase in electricity tariffs and almost simultaneously an increment in the weekly salary cost of each employee.
The reaction on the online comment boards was swift and vicious. According to many, business people are fat cats who live a life of luxury while their employees slave away from dawn to dusk. It appears that the general perception of people who run businesses is that they all live in big villas, drive expensive cars, own a luxury yacht and generally live the good life – while the ones who actually do the work are the employees.
Kind of makes you wonder why we don’t all open businesses, doesn’t it?
The time has come for a bit of a reality check here. The great majority of business concerns in Malta are not big companies raking in big money, as most people think. According to statistics published recently by NSO, in 2008 the local business scene consisted of 28,285 micro companies (employing between one and nine employees), 1159 small companies (employing between 10 and 49 employees), 238 medium-sized companies (employing between 50 and 249 employees) and just 41 large companies (employing over 250 employees).
In other words, the vast majority of business owners in Malta run small operations and are extremely vulnerable to sharp increases in their operating costs. In many cases, the increase in power tariffs wiped out a large percentage of these companies’ profits, and any further increases in costs will obliterate whatever’s left.
The Chamber of Commerce and Industry was right to warn that several jobs could be lost if company overheads are increased further. This is reality and not some empty threat, uttered in order to gain an advantage at the negotiation table.
The facts of the matter are these: for a company to survive it is fundamental that its income is higher than its expenses. If a business ends up in a position where its costs are going up, while at the same time its turnover is decreasing because of reduced demand (for example if less tourists come to Malta or people decrease their spending because of a rumour that electricity tariffs are going up soon), then it has no option other than to shut down.
No business can survive for long living on the edge.
The unions can opt to “resent” this state of affairs as much as they please – however if they do not adapt to it and make the necessary allowances, they will be cutting off their noses to spite their faces. Jobs will be lost, there is no doubt about it.
The job cuts might not make the news – who would report the bankruptcy of a tiny company which employs five people? However, imagine this: what happens if just 1% of the 28,285 micro-enterprises in Malta go bust? What would the consequences be if 282 companies lay off between one and nine people each?
You can do the math, so I don’t need to spell it out for you.
It is to be hoped that this entire scenario can be averted by some last-minute negotiations at the Malta Council for Economic and Social Development. If the budget will have to be delayed, then so be it. Safeguarding jobs is well worth it.
The Chamber of Commerce and the Malta Employers’ Association have made some interesting proposals which merit serious discussion. It is clear that the cost of living has gone up and that employees need their COLA increment – nobody is debating that. A solution must be found where workers get the €6.06 weekly increment, without crippling the organisations that employ them.
There are a variety of suggestions on the table. The Employers’ Association has come up with the idea that Government shares the burden of the increase in salaries. This would be great – however it is highly unlikely that the Minister of Finance will agree to such a scheme.
The Chamber of Commerce, on the other hand, has recommended that the COLA increment should be granted as an allowance instead of forming part of the salary, and also that it should be tax-neutral. It also suggested a moratorium on all government-induced fees and tariffs in order to decrease overheads and compensate for the COLA expense. These are practical ideas and I see no reason why Tonio Fenech should dismiss them.
My hope is that the social partners at MCESD will be able to find a middle ground and a fair solution to this impasse. It is in everyone’s interest that they do so.
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Things have in fact now come to a head, with the Malta Chamber of Commerce and Industry issuing a public warning to government that several hundreds of jobs may be on the line due to the fact that companies are likely to be hit with a double whammy in the coming months – an increase in electricity tariffs and almost simultaneously an increment in the weekly salary cost of each employee.
