By Darren McDonough / Published June 2021
As a property manager or board member, you have probably been involved in the process of hiring a security company to provide services at your property. Maybe it was a new program, it replaced an existing security provider, or it was a transition from an in-house program to hiring a vendor. Very likely a large part of the decision-making process came down to price, which is logical as every community operates on a budget, and the annual expense for security can typically be the first or second largest line item within the budget. Most likely the quality of service was discussed as well, and perhaps a consensus was reached that the community should find a security company that can provide excellent service at low bill rates. Where can you find such a security provider? Is it possible to find a security provider that can offer your community excellent service at low bill rates? Probably not!
The overwhelming factor for a security provider in determining the bill rate per hour is the officer’s pay rate. Security companies are all hiring from the same labor pool with geographic considerations, so beware the provider that proposes lower pay rates with better results. It is important for the property manager and/or board to know what the officers are being paid per hour. If Florida is going to increase the minimum wage each year until it peaks at $15.00 per hour, ask the question and inquire about how much per hour your officers are to be paid. A more effective solution is to make the security provider specify the wages in the proposal, and if you are putting an RFP out on the street, make that a requirement for submittal. An appropriate evaluation for security clients is determining if a security officer should be a minimum wage position. A security officer is often the first person a resident or guest interacts with and is the person responsible for keeping the property safe, reporting incidents, deescalating conflicts, and handling emergency situations like elevator entrapments and water leaks. To recruit and retain responsible officers, the wages need to be on par with the talent required.
In Florida, security officers are required to obtain a Florida D License, which requires an officer to attend and pass a 48-hour training course, apply to the state of Florida with photo and fingerprints, and pass a thorough background check. This license and application process must be renewed every two years. Most security providers have mandatory drug screening as part of the pre-employment process. Most occupations that are so heavily regulated are not being paid at minimum wage.
Pay rates impact the ability to recruit and retain the desired level of officer. While interacting with numerous communities over the years, a common theme that has been observed is they desire or demand a certain image and personality that mirrors the community. For example, an exclusive and luxury high-rise condominium community requires concierge-style security officers. These officers must interact professionally with the residents, staff, and guests of the community; present a polished image; and quite possibly be bilingual or even trilingual. Security providers can certainly recruit these types of officers but not for $10.00–$13.00 per hour pay rate.
Many communities and security providers understand the aspect of proper wage determination and are now paying appropriate wages or attempting to increase current wages to meet labor demands. There is another component to the bill rate calculation that is misunderstood or misrepresented, and that is wage to bill rate markup. Clients can be dazzled by decent pay rates and very low markup percentages, and you might be left wondering, how is my security provider making a profit? That is a great question because they are probably not, or they are making a very small profit by cutting on quality control.
Security providers that propose bill rates in the 1.29–1.39 percent markup from wage rate will need to find corners to cut to turn a profit. If that cutting is overhead (possibly for very small local companies), then maybe that does not impact the community’s security program. If the tightening of the belt is around training, uniforms, background checks, periodic drug testing, supervision, touring technology, turnover, or report writing, then it is impacting your security program.
When a security company has low margins, it is in the unfortunate position of hanging on to substandard officers who might be assigned to your property because they are unable to afford the turnover. Removing officers who are poor performers often causes non-billed overtime (NBOT) for the security company, and that cuts deep into the margins that are already low. If your security company started at low margins, they will naturally be hesitant to replace officers who need to be replaced because of the cost with non-billed overtime, recruiting, training, and uniforms.
I encourage all community association managers and board members to have open discussions with their security providers and potential providers that are centered around both pay and bill rates. Find out the provider’s rationale behind their margins and see if it is supporting a proper program.
Darren McDonough, Ph.D.
Vice President, Kent Services
Darren McDonough, Ph.D., is vice president at Kent Services. For more information, contact email@example.com, call (305) 919-9400, or visit www.kentservices.com.