COVID-19 + Hospitality: What does ‘furlough’ mean for your business?

Just a few months ago it seems none of us had heard the word ‘furlough’. But as the UK Government outlined its COVID-19 support package — which you can read more about here to see what it means for your business — ‘furlough’ became a very important part of many business’ strategy to survive the shutdown. Now that it’s been extended by four months, we invited Co-Founder of TopSource and payroll expert Guil Hastings to our expert webinar for the UK hospitality sector to share what you should be thinking about now.

Flexibility isn’t always your friend

While furlough — and its extension — is good news for many businesses, Guil says good record keeping and consistency is vital to making it work for you. Here’s what you should keep in mind:

The extension of furlough will be a challenge for businesses as they start re-opening. For example, changes in your rota might mean you use furlough for one day, one shift, one week and rotate teams in and out. The key to ensuring furlough is used properly is keeping all your historic and forward labour data well-recorded.

Where you have made a judgement about the use of furlough, your calculations should be consistent and defensible and you should ensure your payroll provider or system is supporting you, so that when data and documents are required as part of your ongoing accounting, it’s easy to access and justify your decisions. 

Getting people back to work will mean new issues

News that hospitality businesses may start to open from July is great for many operators, their staff and the scores of customers looking forward to the relaxation of restrictions. But there are a few parts of the furlough scheme you should consider as you start to re-open and bring staff back.

First, your staff continue to accrue holiday while they have been furloughed. This will mean a balancing act for many businesses to ensure that the usual holiday which you would space out over a year could all come at one time. This will then affect your rotas and the cash you may have to pay when people receive a holiday loading.

The key here, Guil says, is communicating with your teams and knowing the requirements of the law. Ensuring you have the staff to make your rota work — and any cash you need to pay holiday loading — will be vital once your customers start coming back and your staff start to take their holidays.

Guil also says it’s important to remember that tronc — the sharing of tips that can often make up a part of a hospitality worker’s income — cannot be included in furlough calculations. The minimum wage requirements and hours worked may also have an impact on your business’ furlough entitlement.

There are costs yet to come

A key part of furlough which can be overlooked, Guil says, is that furlough payments are a grant to the company, not a benefit to the employees. While this means you don’t need to pay it back, the furlough payments are taxed as income to businesses.

This is — obviously — something businesses need to continually monitor and consider organising your finance and accounting to maximise short-term losses to offset this income. But as you move forward, balance the benefits of furlough with the eventual tax bill.

Want the full picture about furlough and your business?

Watch the webinar here.