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Furlough costs hospitality £542 million a month

Furlough is costing the UK hospitality industry £542 million a month, according to labour management service S4labour.

Although the scheme has been a lifeline for many businesses, easing mass redundancies and retaining jobs in the sector, it says the ability to keep teams employed has still come at a cost to operators.

For a start, the employer continues 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, leading to a monthly furlough bill for hospitality of £542 million.

S4 Labour points out that on top of employment costs, operators have rent to pay, utilities and insurance payments; government grants based on rateable value are available and are aimed at offsetting a large sum of bills, yet leave operators constantly 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, it believes funding is becoming more and more critical.

Sam Wignell, chief customer officer at S4labour, comments: “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.”

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