KingAlarm Managing Director John Azar says the important issue arising from the recent Revenue Court ruling in the case between National Housing Trust (NHT) and security company Marksman Limited is not whether the industry is willing to increase remuneration to its guards, but rather if consumers are inclined to pay more for the “critical service”.

“Are the security officers deserving of more? Of course they are, and no one appreciates that fact more than I do, but there are other considerations to take into account when looking out for their benefit and that of the industry. At the end of the day, what the issue comes down to is, are the consumers of such services willing and able to pay more and is the market able to absorb an increase of this magnitude without having major negative effects on the industry itself, along with even wider repercussions to include a possible and unwanted surge in an already high and concerning crime rate,” Azar argued in an interview with the Jamaica Observer last Thursday.

The KingAlarm boss was responding to the vigorous debate sparked by the September 23, 2022 court ruling that security guards engaged by Marksman are employees and not contract workers and that the firm should immediately start paying its portion of NHT contributions.

The housing trust had taken Marksman to court in 2017, claiming that the company had not paid more than $477 million in statutory contributions for the financial years 2000-2016.

However, the court, while agreeing with the NHT’s claim for a declaration that security guards are employees and not independent contractors, refused the State agency’s claim for outstanding statutory contributions, saying that the NHT “sat on its rights for far too long and received, without demur, payment on the basis that the guards were not employees”.

This, the court said, led Marksman reasonably to believe that the NHT, like the tax authorities, was satisfied and to act accordingly.

“If the NHT is allowed to recover the employer’s contributions, interest, surcharge, and penalties for the period claimed or part thereof, it would be unfair to the defendants,” the court ruled.

Shortly after the court handed down its decision, Marksman, which maintained that it has always paid the three per cent contributions for security officers to the NHT, informed its clients that the ruling “will necessitate an unavoidable 50 per cent increase” in rates.

The Jamaica Society for Industrial Security also raised the issue of increased fees and pundits have questioned whether the ruling will affect security companies’ willingness to pay security guards more.

However, Azar says the question that needs to be answered is “can the market absorb an increase of the magnitude being banded about without serious consequences to the industry and the hard-working officers themselves”.

Azar also said that there is a misconception among some security officers and the general public that security guard companies are making a lot of money and retaining the majority of what is charged to its clients.

“Margins in the industry are minuscule and getting smaller each day with inflation,” he told the Sunday Observer.

“Minimum wage for an unarmed officer is currently approximately $310 per hour to include laundry allowance, while the average rate to customers may hover from company to company between $370 and $420 per hour. While some may say that the security companies are therefore making, on average, $80 per hour, that is simply not so, as there are other real costs such as mandatory insurance, mobile supervision, training, petrol, etc, along with a percentage of admin costs such as light, water, rent, etc. Taking all that into account, any increased cost to companies to facilitate well-deserved benefits to the officers themselves will, in all likelihood, and unfortunately, have to be passed on to the consumers,” Azar said.

He added that it is no secret that security guard service customers are already finding the costs burdensome, among them Government agencies which are the largest consumer of private security on the island.

“We have a particular Government institution who, only a few weeks ago, agreed to pay increased costs associated with the Government mandated minimum wage increase of 2018 — four years later. The same institution is yet to accept the increases which resulted from the minimum wage increase which took effect in April 2022 and our current rate to that particular entity is in the region of $375 per hour for an unarmed officer. Notwithstanding the low rate, that Government entity alone owes us in excess of $60 million with over 92 per cent of that sum already paid out to our staff who provided service there,” Azar revealed.

“The question then arises as to what the likely consequences would be if customers genuinely proved unable to afford this critical service in the wake of a massive and unbudgeted increase associated with the recent court ruling against one of our competitors. Among the possible negative impacts to be considered are the following: contraction in the industry leading to unemployment therein, effect on the already troubling crime rate with less security officers deployed, and reduced earnings for the hard-working security officers as companies restructure their operations to minimise overtime payouts,” he argued.

He said that, while the court ruling may ultimately mean that security personnel would be entitled to time and a half on all hours worked over 40 hours each week, there is no guarantee that companies will roster their staff for more than 40 hours per week. “This would lead to reduced earnings and actually could have a disastrous effect on the earning power of the officers themselves which no well-thinking person would ever want,” Azar said.

He suggested that the concern among customers is not only the magnitude of any increase but the fact that it may be sudden and obviously not budgeted for.

“It is with this in mind that I am hopeful that, coming out of the dialogue with various Government entities, a reasonable time period can be established within which any required restructuring in the way companies operate takes place with the resultant and perhaps unavoidable price increases being implemented on a phased basis, thereby reducing the seismic impact on the industry itself,” Azar said.

The Government, he argued, has the opportunity to weigh in after careful deliberation and to provide the requisite leadership and guidance to allow companies to know what the face of “compliance” looks like and within what time period they ought to comply to allow customers to know what to expect, insofar as increases, thus giving them time to budget for an increase.

Additionally, that would make “the hard-working and deserving security officers know what they, too, should expect and the timelines for same as well”.

He said KingAlarm will remain deliberate in its decision-making, realising its social responsibility and the critical role that it and other providers play in the fight against crime.

“The security officers themselves are critical in this fight, performing an integral and perhaps under-appreciated role in challenging circumstances, and our taking decisions in their interest is clearly of great importance. That said, we do not operate within a vacuum, and all decisions have consequences to include these decisions relating to price increases to clients. We are mindful of the potential impact on our customers, security officers, and country as a whole and will certainly be cautious in our approach in an effort to protect the interests of all stakeholders,” added Azar.