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Business cleaning: how important and effective are minimum wage standards in a sector with strong cost-led competition

Business cleaning: how important and effective are minimum wage standards in a sector with strong cost-led competition
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  81 PART TWO SECTOR CASE STUDIES  82 Chapter 5 Business cleaning: how important and effective are minimum wage standards in a sector with strong cost-led competition? Claudia Weinkopf, Josep Banyuls and Damian Grimshaw Introduction Business cleaning is one of the sectors with the highest incidence of low pay in all five countries investigated. Like other business services (such as security for example), firms in the cleaning sector operate in a context of strong price-led bidding for contracts for services  provision. Drawing on empirical evidence from three countries  –   Germany, Spain and the UK  –   this chapter explores the very distinctive attempts and approaches of the social actors to improve pay and working conditions in the sector. It asks the following questions:    what is the form of interaction between collective bargaining and the system of minimum wage regulation?;    what role do clients play in setting the boundaries on the quantity and quality of services provision?; and    how and to what extent does product market regulation or the presence of a sectoral wage agreement dampen downwards pressures from client businesses on unit prices and the encouragement of informal business practices? Given that cleaning can also be internally organised by potential client firms, the question arises as to whether and how differentials in pay levels influence the decision to subcontract cleaning activities or not. The chapter also investigates several sector-specific issues related to the boo k’s overall concerns with analysing pay equity and social dialogue in this sector, including the low valuation of female-dominated occupations, the extent of compliance with collectively agreed standards and the role of government in industry social dialogue. 5.1. Sector characteristics The growth of the business cleaning sector since the 1970s has been driven by an increased outsourcing of outdoor and indoor cleaning activities to specialised providers as organisations across all sectors of the economy seek to reduce costs and focus on core activities. The expansion of the sector has not been associated with improved conditions of employment. On the contrary, it appears that working conditions have deteriorated or stagnated, with several empirical accounts identifying problems of exploitation of vulnerable workforce groups, such as first-generation migrant workers and women with few educational qualifications seeking  part-time or full-time employment. Trade unions have a very limited presence in the sector so levers for increasing pay are weak. Moreover, the work is physically demanding and jobs are typically managed according to strict (and typically increasing) performance targets. We  begin by setting out the general features of the business cleaning sector in Germany, Spain and the UK (table 5.1).   There is a clear difference in the number of enterprises in business cleaning. The number in the UK is relatively small, just one third that in Germany and half that in Spain. This seems at  83 odds with the respective country sizes of the private sector economy. The UK has seen a rapid growth in the number of firms in the sector, up from around 9,000 in 2003 to 12,000 in 2011. In Germany, however, the number of firms tripled between 2004 and 2010  –   mainly due to the abolition of the requirement that only individuals with a master craftsman’s certificate could operate such firms in 2003 and the subsequent large increase in the number of sole trader operations. And in Spain, despite a small reduction in the number of firms during the recession, there was also a clear increase in numbers in subsequent years.   The number of employees also varies, with the smallest workforce in the UK (443,000 or 1.4% of total employment) and the largest in Germany, at close to 1 million (915,000) (Table 5.1). Employment levels in the sector in the UK dipped at the start of the 2008-09 recession  but recovered subsequently, rising from 409,000 to 436,000 over just two years, 2009-2011. The German cleaning sector managed to overcome a 4.6% decrease in revenues in 2009 without reducing the number of employees (most probably by changing working hours). 1  Figure 5.1 presents employment and revenue trends indexed to 100 in 2005. [INSERT TABLE 5.1 HERE] [INSERT FIGURE 5.1 HERE] The sector is segmented by firm size. In all three countries, small firms make up the vast bulk of enterprises but account for a far smaller share of employment and revenue (Figure 5.2). Among the small and micro-sized firms, there are documented problems of informal (and sometimes illegal) business practices in each country. Among the large firms, multinationals that provide a bundle of facility management services (including cleaning, catering and  building maintenance) have a growing presence in Spain and the UK (less so in Germany 2 ). Examples of the global firms include Sodexo, ISS, Compass Group, ACS, FCC (big Spanish construction groups that also operate in services), Eulen, ISS (Danish capital) and Klüh Service Management 3 . However, the trend in market shares by small/large firms varies by country. In Spain, the share of the market taken by large firms has increased in recent years and in fact their share in the sector is higher than for the service sector overall. In the UK, large firms’ (250+ employees) share of the business cleaning market fell from close to two thirds of total revenue in 2005 to half by 2010 (64% to 50%), although their share of total employment in the sector remained steady at around two thirds. 4  In Germany, the trend is twofold. On the one hand, the number of firms and turnover (market entries and exits) increased sharply  between 2003 and 2010 (entrants up from 773 to 10,775; exits up from 551 to 7,608). On the other hand, large firms with an annual turnover of at least  € 1 million account for 72% of total 1  This could not be verified at the time of writing since data on the number of working hours for 2009 were not yet available. 2  According to a report on the German cleaning sector, all top 10 firms are based in Germany (with some activities in other countries). ISS dropped from rank 7 (2004) down to rank 14 in 2008. The top ten firms are: Bilfinger Berger, Strabag Property and Facility Services, Dussmann, Wisag, Hochtief FM, Compass Group, Voith Industrial Service, Zehnacker, SKE, Klüh Service Management (Deutscher Sparkassenverlag 2009). 3   For example, Klüh Service Management is ranked number 10 in Germany with annual turnover of €441 million (2008) and a 28.5% revenue base in other countries, including Spain, Greece, Turkey and Emirates, as well as a joint venture in London (SMI) with MITIE group (UK) and Sin & Stes (France). 4  Data sourced from  84 revenue and almost 80% of all employees in the business cleaning industry (Bosch et al. 2011: 80). [INSERT FIGURE 5.2 HERE] In Germany, Spain and the UK, the business cleaning sector is an employer predominantly of women workers. Although the data sources are not perfectly comparable, it is notable that Table 5.1 shows a feminisation rate close to 80% in all three countries. Moreover, the share of part-time employment is high, ranging from 68% to 79%. Evidence from qualitative research on the sector suggests that these dual features are underpinned by widespread, often  prejudicial, assumptions about the nature of cleaning work, including that: it does not require a workforce with special qualifications or skills; it can be undertaken by anyone with very minimal on-the-job training; women tend to be particularly suited given their “natural” experience of cleaning their private homes; and staff turnover is preferred to the development of career ladders and pay progression. A UK study of the associated occupational group of hotel room attendants found a surprisingly high level of job tenure, despite low pay and the demanding work required. One of the managers interviewed provided the following explanation:  It’s women who are bringing up young families –   they need part-time work because they need the money, and it then becomes habitual and they get themselves into the  stage where all of a sudden they are fif  ty. ... They don’t think they can move. They don’t think they can do something else.  (cited in Dutton et al. 2008: 110). The data for the three countries confirm that employment conditions in the sector are generally poor. We explore the pay structure in detail below but note here the very low level of median hourly earnings in the sector: just 61% of the overall median for the economy in Western Germany, 54% of the median in Spain (with reference to annual earnings) and 59% in the UK (table 5.1). The low level of pay is certainly not compensated for by better than average working conditions. Short part-time working hours are often scheduled during the early mornings, evenings and nights so as not to interrupt client premises during working hours; the work is organised as much as possible so as to be ‘invisible work’ . 5  Moreover, cleaners very often work alone or in small groups, sometimes travelling from one place of work to another. Cleaning is physically demanding and requires the use of chemical detergents in dirty and sometimes hazardous physical environments (UNI global union/European Federation of Cleaning Industries 2010; Recio and Godino 2011). Also, there is a longstanding trend in the sector towards work intensification. Since the 1970s, the average number of square metres that have to be cleaned per hour has increased (Martinez 2010), although this increased effort has been supported only partially (if at all) by improved equipment. The social partners at the European level regard the clients’ constant drive for lower costs as the major barrier to 5  According to EFCI, in Norway and Sweden, daytime cleaning, which is regarded as a desirable improvement in working conditions by the social partners, has become the rule and represents 80% and 70% respectively of total cleaning time. In Poland, Denmark and Belgium, about half of the cleaning is done in the daytime. In other countries (including Germany, Spain and UK), daytime cleaning remains extremely limited, due mainly to clients’ reluctance to have cleaners around during office times (Kirov 2011: 66).    85 reasonable performance standards (UNI global union/European Federation of Cleaning Industries 2010: 3). Across Europe, workload is a formal subject for negotiation only in Austria and to some extent in Finland. According to Kirov (2011: 77), the figures discussed at the European level vary between the Austrian standard of 200 sqm/hour and the European employer demands of 700sqm/hour. Cleaner  s’ average weekly working time has declined in recent years  –   in the UK from 25 hours (2000) to 23.4 hours (2011) and in Germany from 22.5 hours (2000) to 20.6 hours (2008) (data for Spain not available). The lower level in Germany may be related to the fact that around half of the workforce is in marginal part-time jobs not liable for social security contributions, with monthly earnings up to €400. Together with the current minimum wage  rates, this restricts the weekly working time of these so- called ‘ mini-jobbers ’  to ten hours in Western and around twelve hours in Eastern Germany. German cleaning firm representatives emphasized in interviews that they would actually prefer longer part-time contracts, but employees tend to be reluctant in that regard. If mo nthly earnings exceed the €400  threshold,  pay becomes subject to income tax and social insurance contributions (Bosch et al. 2011: 223f). An important characteristic of the sector is the way bidding for service contracts shapes pay and employment practices. Similar to the security services sector (chapter 6), firms in the cleaning sector operate in a context of strong price-led bidding for contracts for service  provision. However, this tends not to function as a competitive market of equal exchange. In some situations, large client organisations, such as banks, supermarkets and public sector hospitals, exploit their bargaining power to squeeze the unit costs of cleaning firms, which has an adverse impact on their ability to pay decent wages. In other circumstances, however, it is possible for the cleaning firm to exercise control over the market rate and thereby gain the ability  –   although not necessarily the willingness  –   to pay better wages. Whether it is the client business or the cleaning firm that calls the shots depends on the nature of the market and the respective bargaining strength of the client and cleaning firm. Evidence from other studies suggests four factors shape the balance of bargaining power: the number of cleaning services providers able and willing to bid for the contract; their respective expertise in the services to be provided; the expertise in negotiating and managing the contract for services; and the sensitivity of each organisation’s reputation to the quality of the services  provided (Colling 2000; Dore 1996; Grimshaw et al. 2002; Holman et al. 2012). Many small cleaning firms bidding to provide newly outsourced cleaning services may be subject to the client’s strong monopsonistic power, but where two or three multinational co mpanies have long cornered a market for cleaning services they may have greater freedom to set the price and the contract conditions. For example, in her account of taking a job in the UK as a contract cleaner, Toynbee offers the following account of one contractual arrangement:  Most of these hospital services have been contracted out for years now. I imagine the contractors would tell the hospital managers how many hours each job was worth and charge accordingly. The cleaner might only get the minimum wage, but the contractor would charge double, so every extra hour was more profit to them  (2003: 165).
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