Furlough has been a lifeline for so many businesses in the hospitality sector and beyond. However, despite all that the scheme has done to ease the mass redundancies and retain jobs in the sector, it is clear that furlough is not the free lunch it is sometimes portrayed as. That's according to S4Labour, a provider of labour management and productivity tools for the hospitality industry.
S4Labour argue that operators using the scheme benefit from a grant that covers up to 80% of their employee’s average earnings. For many employees, this money will see them scrape through the crisis, albeit uneasily. However, for the employer, the ability to be able to keep teams employed comes with a cost and it is no insignificant amount.
The employer will continue to pay National Insurance contributions, holiday is still accrued, and pension costs are not included in the grant. The total figure for average extra employment costs per month per site, over and above government furlough support, comes to: £3,738 which means the monthly furlough bill for hospitality can be calculated up to £542 million.
On top of employment costs, operators will need to pay rent, utilities and insurance payments; government grants based on rateable value are available and are aimed at offsetting a large sum of bills, yet can leave operators out of pocket. There are also variable costs to using the furlough scheme, such as cash flow costs owning to the fact that the scheme pays in arrears - operators are seeing the money leave their businesses, before being able to claim it back. For most businesses who have little or no expectations of trading profitably for the first 4-6 months of 2021, funding is becoming increasingly critical.
Rob Pitcher, Chief Executive of Revolution Bars and user of S4labour said that the scheme, while welcome, has cost the business £1million at a time it has seen revenue vanish.
Sam Wignell Chief Customer Officer at S4labour added: “With the current levels of government support, businesses are going to run out of cash before they get the opportunity to reopen. The true cost of furlough is much higher than one might imagine.” For more information on S4Labour visit www.s4labour.co.uk