Thank you, Mr. May.
Good afternoon.
My name is Jatinder Sidhu. I am the executive vice-president for Coast Spas, with corporate head offices in Langley, British Columbia.
I want to begin by thanking the honourable member of Parliament, Mr. Mark Warawa, of the Langley—Aldergrove area, and other honourable members of Parliament in attendance who have given us the opportunity to present and share with you our experiences regarding the federal government's temporary foreign worker program. I would like to share with you some background on Coast Spas.
Coast Spas is proud to deliver products in the wellness and home backyard industry. Our hot tub and spas deliver a world of experiences, improved health, and an environment that is meant to be shared with friends and family. We have been an innovator in the hot tub industry since our inception in 1997. Our factory operations are located in Langley, British Columbia, employing over 200 staff. Our worldwide sales operations spans around a group of 200 dealers in 40 countries. Coast Spas is the only hot tub manufacturer to have a prestigious ISO 9001:2008 quality management certification in Canada. We manufacture each and every hot tub with the finest workmanship. Our team of employees have been specifically chosen for their skills, enthusiasm, and the ability to work together effectively. We need great people to build a great product, and our employees are our most important asset.
To ensure our company’s continued growth, we do expect everyone to put in their best effort and to work as a team. In return, we commit to providing fair treatment, a safe and stimulating work environment, a competitive above-minimum wage compensation, a great health and extended benefits program, monthly BBQs, opportunity for improvement, bonuses, service awards for perfect attendance, and a productivity sharing bonus program. Recognizing that we are still a new industry, we hire, train, and guide individuals with the right craftsmanship and skills to provide our customers with the world's best built spas.
Coast Spas' experience with the temporary foreign worker program is as follows. Although the federal government's temporary foreign worker program has been in place for quite some time, Coast Spas was only able to use the program in 2007 and 2008. Since then we have been unable to obtain labour market opinion approvals to continue using this program, regardless of countless efforts on our part to contact Service Canada officials and other elected government officials at the federal level. On a couple of occasions, we even wrote to the Minister of Human Resources and Social Development in Canada, which did not result in any favourable outcome for Coast Spas.
The following are some of our concerns. Raising wages to $15 to $20 per hour would increase our cost of production and will force us to raise our hot tub prices. Ultimately we will no longer be competitive within the hot tub industry in North America or internationally.
The hot tub industry was born in southern California in the early 1970s. American manufacturers in the hot tub business are paying a starting wage of only $8 to $10 per hour. How can we compete with a manufacturer who is paying half the wages we are paying to our new workers in Canada? There are approximately 100 hot tub manufacturers worldwide, with the majority of them in southern California. Of those, fewer than 10 are Canadian. Coast Spas fully loaded weighted average wage rate for production workers in 2016 is over $20 per hour. This rate includes the base hourly wage rate, the cost of the health and extended benefits programs, and the earnings achieved over progressive work experience. It requires a level of competency for each worker to achieve this amount.
The starting wage rate for all entry-level positions with no experience is $12 an hour, and this is the same rate we have been seeking through the foreign worker program. The cost to provide MSP and other extended benefits program runs close to $5 per hour. In cases when hiring a worker with previous industry experience, we do make exceptions, and the starting wage is reflected accordingly to the competitive market rate.
It is important for you to know that we manufacture to orders received only. Hot tubs or spas as a finished product are expensive and take up a lot of space, which becomes limited during our peak season, which runs through the months of March until September. Coast Spas has been honoured and has the privilege of being one of Canada’s 50 best managed companies for six consecutive years, leading us to the platinum status award.
Yes, we are a leading manufacturer of quality hot tubs and spas, but operating manufacturing operations out of the west coast of Canada has been extremely challenging over the last 10-year period. We have ended every fiscal year in the red with fiscal losses. Why? It's because during our peak season of March to September, the full complement of production manpower has never been achieved due to local labour shortages in Langley, British Columbia, resulting in us not being able to fulfill customer orders within the acceptable industry lead time of two weeks from order placement.
Subsequently we have been forced to lengthen manufacturing lead times over the years to more than four weeks, resulting in customers not ordering the product from Coast Spas but rather from other manufacturers, in the U.S., who can deliver the product within two weeks. This has ultimately affected our business overall. It has been 30% lower, when compared year over year over the last five years.
Prior to the year 2006, Coast Spas employed more than 300 workers every year for the years 2003, 2004, and 2005. During the peak season, March to September, to fulfill customers' orders and to stay within acceptable manufacturing lead times, we were able to achieve our manufacturing goals; however, because of labour shortages, we have been unable to hire workers consistently since 2006 and were forced to look at the foreign worker program offered by the Government of Canada.
The following years, 2008 to 2010, were very disappointing for Coast Spas, as an application to obtain a labour market opinion was rejected. No worker was hired through the foreign worker program after that.
Over the years, and last year more specifically, we learned that not only were the terms and conditions of the foreign worker program changed, but now employers were being asked to submit a $1,000 Canadian per applicant non-refundable fee to Service Canada at the time of application—a whopping 100% increase over the last 10 years. The fee was non-refundable, should Service Canada reject the application.
So imagine: if we apply for 50 workers under the program, then our cost on the application submission date is $50,000. Should Service Canada reject the application, they keep all the money and we are now at a loss of $50,000.
Hiring good people to work has been very challenging over the last 10-year period. For Coast Spas, our annual attrition rate has been above 70% during this time.