Price Changes in the Private Security Industry
It’s no secret that the cost of living has risen in recent years. We’re seeing this trend in the security industry as well. As a trusted partner, we believe it’s important to communicate openly and honestly about the reasons behind our annual price adjustments. In this blog, we explain why indexing our rates is essential for a sustainable partnership.
Why are costs rising in the security sector?
SERIS is a service provider in the fields of security, safety, and hospitality. Our employees—including security guards, fire safety officers, and receptionists—work hard every day on behalf of our clients. Unfortunately, the costs of labor, energy, and security technology are constantly rising. These developments have a direct impact on our operations and make it necessary to adjust our rates annually.
In short, the main causes of cost increases for SERIS are:
- Labor costs: As a labor-intensive company, we rely heavily on our employees. Wage increases (under the Collective Bargaining Agreement for Private Security) and rising social security contributions account for a significant portion of our total costs.
- Energy costs: The growing demand for energy and rising prices have a direct impact on our operating costs, particularly for our mobile services.
- Security technology costs: The ongoing development of security technology and the associated investments in new equipment and systems represent a significant expense.
What types of indexing do we see in the Netherlands?
At SERIS, we prefer to take a transparent approach when implementing price increases. By adjusting our prices annually on January 1 based on verifiable cost increases, we ensure fair and transparent pricing. This way, our clients know exactly which costs are driving each part of the price increase.
In addition to our own indexing method, the Consumer Price Index (CPI) and the Services Price Index (CBS 801 and 802) are also frequently used. Although these indices can provide an indication of general price trends, they are not always directly applicable to our sector. As a result, security companies may be inclined to set their rates higher at the start of a contract to protect themselves against potential cost increases.
Consumer Price Index
The Consumer Price Index (CPI) is a widely accepted measure of general price inflation, but it is less suitable for accurately reflecting specific cost trends within the security industry. The CPI is designed to measure price trends for an average household and cannot adequately capture all specific cost factors within the security sector, such as investments in new technologies, training, and certifications. Furthermore, collective bargaining agreements contain provisions aimed at improving working conditions. While these measures are positive for employees, they can also lead to higher labor costs that are not directly reflected in the CPI. Due to these limitations, the CPI provides an incomplete picture of actual cost developments within the security industry.
Service Price Index
Although the CBS figures 801 and 802 provide a general indication of wage trends in the security industry, these indices are not specific enough to capture the nuances within this sector. The security industry has specific cost items, such as investments in new technology, training, and certifications, which are not directly reflected in these general indices. In addition, collective bargaining agreements and other sector-specific developments, such as changes in legislation or new safety requirements, can lead to additional costs that are not included in the CBS figures. By indexing exclusively on the basis of these general indices, insufficient account is taken of the unique cost developments within the security sector. As a result, security companies are not sufficiently compensated for rising costs, and the quality of the services provided comes under pressure.
The risk of a fixed price over multiple contract years
In the case of a fixed-price contract spanning several years, without the option to index rates, the following scenario may arise. During the contract period, wages in the security industry rise significantly, as do costs for services such as screening or training. The client then continues to pay the old, lower price, while the contractor may incur a loss. To prevent this loss, security companies may be tempted to set the fixed price higher at the start of the contract. This means the client may end up paying more than necessary. And what if costs actually decrease? Then the client still pays the higher, fixed price. By adjusting prices annually to reflect market conditions, we prevent the client from overpaying or the security company from facing financial difficulties.
The Importance of Continuity
Given the narrow profit margins in our industry, it is crucial that contracts remain financially viable. Without the ability to pass on cost increases, we cannot continue to invest in the quality of our services and run the risk of entering into loss-making contracts, which ultimately jeopardizes the continuity of our partnership.
Historically, price increases in the private security sector have ranged between 2.5% and 5.5%. This was mainly due to a number of long-term collective bargaining agreements and moderate inflation. In recent years, however, we have faced exceptionally high cost increases, partly due to the war in Ukraine and the ensuing energy and transportation crisis. As a result, there were even years with cost increases exceeding 10%.
At present, a tentative agreement has been reached on the Collective Bargaining Agreement for the Private Security Sector between the employers’ association and the unions. This agreement is currently being presented to the members of both parties. If approved, the following wage increases will take effect starting with pay period 1 of 2025:
- 4.5% pay raise
- Increase in the travel allowance from 18 to 23 cents
- Discontinuation of the indexation of vacation hours (the total number of vacation hours remains the same)
This results in a total increase in labor costs of approximately 6%.
Indexing: Maintaining Quality, Reducing Costs
Just like in many other sectors, our security services are also feeling the effects of rising costs, such as higher wages, energy costs, and other economic developments. These factors have a direct impact on our operations. At SERIS, we strive for maximum transparency. Our prices are based on actual costs, so clients know exactly what they’re paying for. To limit the impact of price increases, we continuously invest in efficiency and innovative solutions. This allows us to remain a reliable partner that prioritizes quality, service, and a fair price-quality ratio. Together, we work toward a sustainable relationship centered on quality and trust. Would you like to learn more about how we can optimize your security? Then contact us.
