Your Cleaning Costs are Going Up and What to Do About it
Dealing with Employment Regulation Orders (ERO’s)
You may have noticed in early December your organisation was made aware of a price increase from your contract cleaning suppliers of 3.75% usually in the form of a letter from a CEO or MD you never heard from before telling you that because of the Employment Regulation Order (ERO) prices must increase by 3.75%, and that their service is of absolute importance to you and it has been provided with excellent quality so far -, this may be true but that doesn’t mean you have to accept this price increase, below I will briefly discuss ways to reduce your organisations exposure to EROs and hopefully provide some tips on how to achieve a fair and equitable for both your organisation and your supplier.
Firstly, What is an ERO?
An Employment Regulation Order (ERO) is an instrument drawn up by a Joint Labour Committee (JLC), adopted by the Labour Court, and given statutory effect by the Minister for Enterprise, Trade and Employment. The purpose of which is usually to set a new price floor for the cost of staff in certain sectors such as contract cleaning; presumably to improve the income of traditionally lower-paid employees. This is well-intentioned government interference in the market, which depending on your political tendencies you will agree with, but we will not go there for now. Naturally additional regulation adds additional costs to the operation of the business which will usually be passed onto the end consumer, however, please be aware that there is nothing in an ERO to state your organisation must bare the burden of these costs.
Tips on What You Should Do
You must understand your position.
Are you a big supplier for this company?
Are you willing to walk away from this supplier?
Are you willing to absorb the increase?
Are you willing to change how things are done?
Do your key stakeholders have the same opinions?
If you do not like difficult conversations and are willing to absorb the costs, do at least pick up the phone and ask if there’s something they can do? (they can). If, like many charities, you’re simply unable to accept an increase these steps can assist you in formulating your negotiation:
Have your spend data understand how much you have spent with this supplier over the years;
Read the ERO. Let the supplier know you understand what it is and its intended purpose;
Prepare some concessionary carrots. Better payment terms for example.
Do some market research. The EROs purpose is to pay an increase to the cleaning staff. Not the CEO. Not the CFO. Not the cleaning supplies or office support staff – Find out the percentage of overhead that is associated with the staff affected by the ERO only;
Once your armed with some facts outline your issue with the increase, and that you’re not willing to accept 3.75%;
Ask what efforts the supplier has made to reduce their costs so that you would not bear the full burden of the cost?
At this point the supplier will likely pushback with something along the lines off the full increase is warranted because they have not asked for a price increase, inflation, COVID19 Costs etc. These are all costs you face in your business too! Ask the supplier, how you are to explain to your board or shareholder’s that you must take the on the costs of the cleaning suppliers costs (such as COVID19 ones) which your organisation is already feeling anyway.
Drop your research in at this point, tell the supplier your aware cleaning staff do not represent 100% of your costs, that the ERO is a price increase for these staff only which represents roughly 70-85% of cleaning overhead. Ask for the suppliers help in coming up with a fair solution.
Your supplier will come back with an amended offer push it a small bit. Do not try and eat the supplier’s lunch. If they are holding form on the offer use your concession carrot (payment terms etc). if you have the capacity it can be a powerful tool especially in uncertain times.
I conclude with a bit of cheese although a very relevant mindset in this case. Do not let them take you to the cleaners.