Minister's call for retailers to pay full wages 'a stark disconnect from reality'

A minister’s call for retail businesses to start paying full wages to employees now that the COVID-19 lockdown is over has been met by contempt by retailers and the opposition spokesman.

Carmelo Abela, whose ministerial portfolio within the Office of the Prime Minister includes industrial and employment relations, said on Monday that shops that have reopened after COVID-19 restrictions were lifted must start giving employees their full pay.

His words may not go down too well with retail operators whose return to ‘normality’ is still conditioned by safety measures that limit customers and incomes that are nowhere near what they were before the pandemic hit in March.

Claudio Grech, the Nationalist Party’s spokesman for the economy, told BusinessToday that Abela’s words were merely a curtain-raiser for the government’s withdrawal of the wage supplement.

“Unfortunately this reflects a stark disconnect from the reality which businesses and their employees are living in today,” he said.

“Now one needs to also understand that the existing wage supplement and main benefits - including rent support and utility support - are only available for a select number of sectors with thousands of businesses and their workforce left to face the critical economic conditions on their own steam.”

He said that rather than having Abela trying to pass the buck to the businesses, the government should be providing targeted, temporary and timely relief to all those enterprises that have been materially impacted, with relief intensity linked to the extent of impact on revenues and liquidity.

Moreover, he added, relief packages should be reviewed to support the specific requirements of the targeted industries, ensuring that businesses are provided with adequate levels of investment aid - in grants and tax credits - to enable them to rapidly make the necessary restructuring, realignment and transformational efforts to achieve sustainability and safeguard jobs.

Standing firm

But Abela told BusinessToday that his appeal to employers was in line with the phase of the new normality, now in an economic recovery mode following the pandemic.

“With shops and other places allowed to re-open and revert back to pre COVID, it goes without saying that even the workers’ conditions should go to pre -COVID levels,” he said.

He said that this was also part of an agreement reached by the Malta Council for Economic and Social Development (MCESD).

As part of the same agreement, employers had agreed to top up wages by €400 once government committed itself to paying €800 of the employees’ wages.

“This ministry expects all employers to abide by that same agreement, even at this stage,” Abela said.

He said the government had adopted an active approach that transitioned from one phase of the pandemic to the next.

This is now the phase for a new normality, were shops are assisted to reopen while alleviating the shock burdens they experienced because of COVID.

“Those establishments that reopen their operations and return to full hours shall give their employees a full pay. The new normality should not, and will not be allowed to ostracise employees,” Abela insisted.

“We will push strongly for full pay and full conditions to return as soon as possible”.

Retailers’ reaction

The owner of a clothes outlet in Valletta told BusinessToday that he was not in a position yet to start paying his five employees the full wages they enjoyed before the coronavirus pandemic hit.

“The minister seems to have forgotten the losses that we have incurred over the past few months and the fact that we will be operating nowehere close to optimum profitability for the foreseeable future,” he said.

Another businessman, owner of a household goods shop, agreed.

He said it will still be some time - many months - before he will be financially stable enough to start paying pre-COVID wages again.

“My three employees understand this and, though struggling, they are making ends meet with the reduced salary I can afford to give them, supplemented by the government subsidy,” he said.

“This is not ideal and I would like to be able to pay them the full wages, but we are already struggling as it is, with reduced clientele and business, and our focus has been on not having to fire any of the staff.”

Employers’ concerns

Joseph Farrugia, Director General of the Malta Employers’ Association, said that companies that returned to normal operations were expected to pay full wages.

Assistance schemes were still in place for companies that were still facing financial difficulties.

Farrugia did agree that it might indeed be too early for many retailers to start paying full wages once again.

“While one cannot expect wage subsidies to continue indefinitely, the coming three to four months are critical for many businesses who have been adversely affected by the COVID crisis,” he said.

“Reducing the wage supplement at this stage might be immature and we believe it would have been better to leave the age supplement as per Annex A entitlement but restricting it to fewer companies as the economic situation improves.”

Relief vs bail-out

Abela’s comments come after warning last month that employees were not at liberty to decide for themselves if they should or should not report to work if their employer opened shop.

“I made it clear that all employees had to report to work but now we are at the next juncture of our economic response and I will now see that the improved reality also reflects itself in what is experienced by our employees. Now is the time for all those shops that have re-opened to give employees their full pay,” Abela said.

He insisted that government is still supporting these companies with the same level of wage supplement as it did in March and April.

But Grech insists that relief should also take into account the investments and re-engineering of operations that certain sectors would need to undertake to align their practices to the evolving health protocols and operational revisions imposed by the authorities.

“The rigorous adherence to these protocols is fundamental to ensure the larger objective of protecting lives, containing viral infection rates and promoting a healthy nation are duly secured and sustained throughout this challenging period,” he said.

“It goes without saying that relief should not be construed as bail-out of failed or irresponsible enterprises but as an economic stimulus to support healthy businesses nurse the damage inflicted by the economic storm and helping them emerge stronger out of it.”