On March 2020 Mr Sunak announced the government would cover 80 per cent of at-risk employees' salaries for three months, as part of a series of measures intended to support the UK economy during the ongoing coronavirus crisis.
He also announced matching measures for the self-employed, which affects advisers and their clients alike.
Regarding the measures for the employed, this process is known as a furlough where a worker is on temporary leave as an employee due to the special needs of a company or employer, such as economic conditions.
The amount announced by the Chancellor is capped at £2,500, meaning an employee that earns above £2,500 would still get a maximum of £2,500 and employees earning below that level can earn 80 per cent of the amount.
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The employee may also get 20 per cent more on top of the 80 per cent from the company, but this is at the employer’s discretion.
Some in the industry stress that the measures benefit companies whose business model is more transactional rather than income based.
Scott Gallacher, chartered financial planner at Rowley Turton says: “If their business model is primarily transactional, there might have been a need to lay off [advisers] as the firm is unable to do the normal things in quite the same way.”
Overall he welcomes the move, calling it a “great thing” for the industry.
He says his company’s business model is more income based, as the firm derives money through a number of ways, such as conducting annual reviews, managing their clients’ investments, to name a few.
But he still stresses there will always be transactional elements to a business.
“Even in our business model, if everybody is working from home, we may need to reduce somebody’s hours so having that additional support is a great thing,” he says.
But Ricky Chan, chartered financial planner does not think the measure will help advisers.
He points out most advisers earn “well above that threshold” and advice companies that resort to furloughing their employees will have a massive cashflow problem.
This means they are also less likely to pay the additional 20 per cent which is voluntary, he predicts.
Sarah Cardew, partner and head of corporate tax at Irwin Mitchell, echoes this view. “It is going to be a matter of cashflow as the firm will need to pay their staff [if they decide to] and then claim a grant through the scheme.
“The scheme is backdated to March 1 2020, but, if the firm was struggling before then, of course, this scheme will be of limited help.”
Mr Chan says: “For firms who are concerned about costs and looking to reduce costs in the first place, the measure is not going to have a big impact as the firm would have got rid of the employee anyway.”
Furloughing any adviser would break the individual’s trust with the firm, experts warn.
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