How Do We Account for Coronavirus Furloughed Employees – NCCI

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Account for Coronavirus Furloughed Employees – NCCI Adds Basic Manual Rules

The Question – How do we account for Coronavirus Furloughed Employees has become the most popular question that we now receive from blog and newsletter readers.

picture of accountant account for coronavirus furloughed
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This is not a replacement for Class Code 8871 – Telecommuting Clerical Employees.  See this article for that distinction.

NCCI – the workers’ compensation rating bureau for approximately 40 states added in a few new sections to their rules.   If you are the person responsible for the bookkeeping or accounting with your company and you are trying to account for Coronavirus furloughed employees, you are in luck.

Below is a summary of the rules that NCCI added to their manuals.  I am not going to paraphrase the rules. I do not like quoting NCCI rules verbatim.    In this case, the rules are very specific, so I added them in almost verbatim in parts.  The very important part of the rule has been bolded.

Recording the payroll inaccurately could cost your business a large amount of insurance budget. 

Woman doing Account for Coronavirus Furloughed bills
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Payments made by an employer or any public governmental entity to paid furloughed employees as a result of federal, state, and/or local emergency orders, laws or regulations, issued due to the COVID-19 (coronavirus) pandemic which impact an employer’s staffing or business operations.

Look at this part of the rule closely – 

However, any appropriated funds or loans received by an employer as authorized by any law or regulation, or public governmental entity, that are used by an employer specifically to retain or hire working employees are not excluded.

This rule has a built-in expiration date – 

This Rule 2-B-2-n is effective March 1, 2020. The expiration date of this rule will be December 31, 2020, which may be amended to an earlier or later date as circumstances warrant in consultation with state regulatory authorities. This rule will be removed from the Basic Manual automatically, upon the applicable expiration date.

Idle time does not count as furloughed. 

Middle-aged couple working Account for Coronavirus Furloughed on laptop in kitchen
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For purposes of this Rule 2-F-1, idle time does not include “paid furloughed employees” or “payments to paid furloughed employees” as provided in Basic Manual Rule 2-F-3. The expiration date of this paragraph will be December 31, 2020, which may be amended to an earlier or later date as circumstances warrant in consultation with state regulatory authorities. This paragraph in this Rule 2-F-1 will be removed from the Basic Manual automatically, upon the applicable expiration date.

3. Payments to Paid Furloughed Employees During Federal, State, and/or Local Emergency Orders, Laws, or Regulations Issued Due to the COVID-19 (Coronavirus) Pandemic

Florida has a few exceptions that I did not note here.  

For purposes of this Rule 2-F-3, ”paid furloughed employees” and “payments to paid furloughed employees” are defined within this rule. “Paid furloughed employees” means employees who continue to receive payments during a temporary layoff or an involuntary leave and are not performing any work duties for an employer.

“Payments to paid furloughed employees” means payments made by an employer or any public governmental entity to paid furloughed employees as a result of federal, state, and/or local emergency orders, laws or regulations, issued due to the COVID-19 (coronavirus) pandemic which impact an employer’s staffing or business operations. Such payments do not include any appropriated funds or loans received by an employer as authorized by any law or regulation, or public governmental entity, that are used by an employer specifically to retain or hire working employees.

Your Workers Comp Premium Auditor and Your Payroll Records

Hand holding a calculator Account for Coronavirus Furloughed calculation
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Payments to paid furloughed employees must be assigned to Code 0012, in accordance with the Statistical Plan. Payments to paid furloughed employees made in accordance with this Rule 2-F-3 are excluded from the premium and experience rating calculations only if the employer keeps separate, accurate, and verifiable records. If separate, accurate, and verifiable records are not maintained, payroll is assigned to the classification for work normally performed by the employee prior to any emergency orders, laws, or regulations issued due to the COVID-19 (coronavirus) pandemic.

This can cost your company a large amount of premium if you do not keep accurate payroll records that separate out furloughed employees. 

If an employee is requested to perform any duties for an employer, the employee is not deemed a paid furloughed employee for any period of time they are performing duties for the employer. If the employee is not deemed a paid furloughed employee, payroll must be assigned to the classification applicable to the work being performed in accordance with Basic Manual Rule 1-A. 

This Rule 2-F-3 is effective March 1, 2020. The expiration date of this rule will be December 31, 2020, which may be amended to an earlier or later date as circumstances warrant in consultation with state regulatory authorities. This rule will be removed from the Basic Manual automatically, upon the applicable expiration date.

Set Up Your Accounting Package Now To Handle These Employees

Excel(r), QuickBooks(r), or Your Accounting Package can now be your best aide in keeping track of furloughed employees.   Keep the employees listed under 0012 Coronavirus Furloughed Employees.  Your premium auditor will ask for these records.

 

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James Moore

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Mgmt Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

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