Latvian Paradox: Weekends and Holidays Bring Losses to the Hospitality Sector 0 11

According to the Labor Law, work on holidays is paid at double the rate. For example, in May of this year, there are four holidays that will increase labor costs. In many sectors, including the hospitality industry, such days are extremely inefficient.

"In practice, the costs of working on holidays often become a financial disaster because, to perform the same amount of work on a holiday, labor costs for the business suddenly double," comments Toms Zukulis, chairman of the board of the Tiamo group. It is precisely the quiet off-season months with a "rich" holiday calendar that bring the greatest losses to the industry.

Toms Zukulis notes that personnel costs in the hospitality sector account for approximately 35–40% of the selling price. However, these figures can vary among different establishments – it depends on the specifics of the location, menu, service format, price level, and other factors. If a customer pays 10 euros for a dish, about 1.74 euros is VAT. Of the remaining amount, approximately 40% is paid out as wages, which amounts to 3.30 euros. The remaining funds must cover other expenses – food for cooking, electricity and water bills, cleaning supplies, rent, and dozens of other items, and ideally, also leave something for development.

"If on a regular day personnel costs are 40%, then with doubled pay they become twice as high – up to 80%. Is there enough left to pay for products and other expenses? Honestly – most often no. At this point, businesses have a logical question – why work at all on holidays? Why not just close the doors and let everyone rest? Some do just that, and we also sometimes close several establishments on holidays," notes the entrepreneur.

According to him, due to the double expenses, Tiamo group cafes in Riga and Liepaja will not operate on May 1 and 4.