Some hotels will shut for good if the Government fails to give the industry a break on employment overheads, industry leaders have warned the Premier.

The Bermuda Hotel Association asked for an extension of the 12-week unemployment benefits programme and relief from some health insurance costs in a letter to David Burt.

The BHA also requested a change to the law that requires staff who have been laid off for four months to be terminated automatically — which triggers severance payments.

The letter, dated May 11, said: “Should the requested amendments not be acted upon we fully expect that businesses, including a percentage of our member properties, will be forced to permanently close their doors with a catastrophic and negative impact on our economy and therein significantly increasing our overall unemployment numbers of Bermudians.”

The letter was signed by Stephen Todd, the chief executive of the BHA, and Tim Morrison, the organisation’s president.

Mr Todd told The Royal Gazette last night: “Our intention was not to scaremonger. We just want to raise the concerns of our members about how we can remain viable. We know that the same concerns are shared by businesses in other sectors.”

A government spokesman last night confirmed the letter had been received and its contents noted, but said the requested health insurance changes could impact the hospital’s ability to serve the community.

Hotels and guesthouses have been shuttered since the airport was closed on March 20 and thousands of staff have been laid off.

Section 32 of the Employment Act 2000 stipulates that the maximum duration of a layoff is four months — after that the employee is ruled to be terminated and the employer is required to make a severance payment, depending on time employed.

However, Mr Todd and Mr Morrison argued in their letter that hotels were unlikely to open again inside the four-month period and that the law should be relaxed to avoid “harsh financial costs” to hotels and other industries.

Mr Todd said the financial strain of a blitz of redundancy payments, after a period of little or no revenue, could be the last straw for some businesses.

He added: “It’s the intention of our members to re-employ as many of our laid-off colleagues as possible. The challenge we have is that we don’t know when that’s going to be.”

Mr Todd highlighted that employees had to be paid off after four months “regardless of whether the intention is to bring them back to work” and so an extension of the allowable layoff period could help to save jobs.

He added the impact of large-scale severance payouts on a business’s viability was a concern for owners of many companies across different sectors of the economy.

Employers who continue to pay their laid-off employees’ health insurance face mounting costs. The BHA letter proposed a change that would bring some relief.

It explained: “It is the request and recommendation of the BHA that the Bermuda Government provide temporary relief to the hotels by permitting the local insurers to take a break from funding the Mutual Reinsurance Fund premiums and in turn pass the savings of $355.31 per person insured, per month, directly in the form of financial relief to the hotel sector employees and employers.”

The letter added unemployment benefits paid under the 12-week programme were scheduled to run out for some laid-off hotel staff as early as mid-June.

The BHA said urgent consideration should be given to an extension because of the uncertain future of the industry.

Mr Todd added: “We realise that what we’re proposing will take revenue away from the Government, but we are simply looking to explore ways we can remain viable.”

A government spokesman said: “Every sector in Bermuda is taking the opportunity to set out their thoughts on how their interests can best be served in this period of recovery and this is welcomed.

“This economy will need a concerted effort of all parties to rebound from the impact of this pandemic.

“The proposal regarding the Mutual Reinsurance Fund is troubling however as that has the potential to create a significant disadvantage to the hospital. There could hardly be a worse time to reduce the hospital’s ability to perform its vital function in this community. We are actively considering this and other proposals received.”

Mr Todd hoped there would be an opportunity for the BHA, and the Bermuda Industrial Union, to sit down with the Government to discuss potential solutions.

The most recent employment survey, conducted in 2018, found that island hotels employed 2,383 people, nearly three quarters of them Bermudians, spouses of Bermudians or permanent resident’s certificate holders.