Pubs can furlough staff under the Coronavirus Job Retention Scheme, which sees the Government cover 80% of an employee’s wages if they cannot work amid the coronavirus pandemic. This scheme has been extended until 30 April 2021.
However, employers must pay HMRC the national insurance contributions (NICS) and pensions for hours not worked, which was not the case when the furlough scheme was first introduced in the first lockdown.
Operators told The Morning Advertiser (MA) these payments meant they were struggling financially and "more than wiped out" the income from grants.
It's killing us paying it, we have to keep up to date or HMRC will call in the bounce back loan— Ian Mitty (@ianmitty) February 15, 2021
If we can't open fully by Easter we will be unlikely to survive
Mike Reeve operates two sites, the Weld Blundell in Liverpool and the Yew Tree in Preston, Lancashire and said these payments were a “massive burden”, last month at £4,500 across the two sites.
The current system means many pub operators are going further into debt and only able to pay themselves a low salary, he said.
He said: “I fully appreciate that we are back to 80% furlough but paying all the NICS and pensions is a massive cost to us and the grants don’t cover it.”
The operator took out the full £50,000 Bounce Back Loan and has a large VAT bill to contend with. He also has a “mounting” HMRC PAYE debt, which he cannot clear as he has to have enough cash in the bank to pay his staff each month.
Grants not covering costs
In response to a MA social media call-out, another operator said the employer contributions were now "mounting up to a large amount of money". These payments plus rent payments were "painful".
Another operator added: "The grants are not sufficient to cover this alongside all other costs, not by a country mile."
Bath Pub Company managing director Joe Cussens said the extra contributions meant his November figures were “twice as bad” compared to the spring lockdown.
He explained: “It was the effect of us having to pay pensions and national insurance, plus on top of that, in the spring lockdown it was easier to put a lot of supplier agreements and payments onto hold.
“So you had a lot more overheads [in the second lockdown] and a lot more NICS and pensions. Overall it added up to a far worse position.”
Cussens said he did not yet know the impact of the third lockdown but was hopeful recent grants would offset the issues.
"We're assuming we are going to lose a fair chunk – but we won't know until we come out the other side of that [lockdown]."
Prolonged relief needed
He added: "When we come out of lockdown and get into summer, I don't think demand is going to be tough. Probably the majority of our people will be off furlough. What's going to need to happen though is the VAT cut and the business rates holiday be extended because without that, we are just not going to be able to recapitalise."
The trade has continued to call on Chancellor Rishi Sunak to extend sector relief such as the VAT reduction and business rates holiday beyond the spring, ahead of the Budget on 3 March.
UKHospitality chief executive Kate Nicholls said: “All the while pubs are closed, costs continue to pile up. Revenue is not coming in, but bills still need to be paid, especially to keep our staff onboard. This isn’t going to change appreciably until businesses are allowed to open and highlights the need for a clear plan from the Prime Minister next Monday. That will be the best way to alleviate the financial pressure, keep businesses afloat and keep these jobs alive.”
Prime Minister Boris Johnson is to set out a roadmap out of lockdown on Monday 22 February, after considering the latest coronavirus data.