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Job Retention Scheme Update

Posted on in COVID-19
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Understandably we have received a number of calls in the last few days regarding the job retention scheme. One of the main questions has been, 

Do we have a template for a furlough agreement?

The independent workplace advisory service, ACAS, has said that the furlough agreements should be in writing and it’s a good idea to include: 

  • the date furlough starts 
  • when it will be reviewed 
  • how to keep in contact during furlough, 
  • a statement that a worker will stay employed while they are furloughed, but they must not work. 

Please see below the suggested wording and two example letters (which has been drawn up and adapted by ACCA from the ACAS suggested content) which you may use as a guide and alter as per your own individual circumstances. 



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There is more detail coming out now about the scheme and we are taking guidance from ICAEW and ACCA bulletins.

The following is our understanding of the policy and how it will work based on the information published so far by ICAEW, ACCA and the Government. It should not be 100% relied on for advice at this stage but is intended to give an indication of how the scheme will work and allow you to start making business decisions and provide some detail to your staff.


Under the Coronavirus Job Retention Scheme, all employers in the UK will be able to access support to continue paying part of employees’ salaries who would otherwise have been laid off during the ongoing crisis. 

Furloughed workers are employees whose employers cannot cover staff costs due to coronavirus, and as such they have been asked to stop working but have not been made redundant. 

Such employers are now able to access support to continue paying part of their staff’s wages, to avoid redundancies and so they can retain their teams. 

To avoid fraud, there are expected to be cross-checks between the applications for grants against PAYE records for each employer. 

Employers will be required to make one claim for the entire workforce, record how many workers are covered and will need to keep records. 


X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of £1,665 which is after deducting PAYE of £191 and employees NIC of £144. On this salary, the employer pays employers' NIC of £174.

The available grant for the employer is the lower of

(a) 80% of (£2,000 + £174), and 
(b) £2,500
So, a grant of £1,739.

The cash required by X Ltd to furlough based on maintaining the existing salary is £435 per month. It is a matter for employment law whether the employer is required to pay this top up. Discussions with employees may have agreed that the employee has agreed to a different arrangement during their furlough.

Notes to illustration based on an extended understanding of how the scheme will work

  1. If Mr A had not opted out of auto enrolment, X Ltd would also be making pension contributions on his behalf. If so, the available grant is based on 80% of (gross salary + Employers' NIC + employers pension contributions paid), subject to the monthly cap of £2,500.
  2. We understand that the rules for the scheme are being designed with underlying reference to employment law. If the individual is still under contract, Mr A can expect to receive his salary in full. The £1,739 grant paid to X Ltd should not be taken as the new maximum cost of employment to the employer unless the contract has been redrafted.
  3. Subject to the employment contract and any amendment, the salary which the employer actually pays the employee during the furlough period may be different to the pay paid used as the reference period and upon which the grant figure is based.
  • The employer should discuss with affected employees and notify them (preferably in writing) that they have become ‘furloughed workers’. ACAS have a suggested information that should be included that we have adapted and is at the bottom of this article with suggested letters. 
  • The employer can claim a grant of 80% of workers’ wages up to £2,500 a month once they have been furloughed. 
  • The employees remain on the payroll deducting tax and national insurance under the pay as you earn (PAYE) system. 
  • If employers want to top up pay levels, they can, but will not be able to claim for more than 80 per cent of £3,125. 
  • The employer could choose to fund the differences between this payment and employee’s salary, but does not have to. 
  • The furloughed workers should not undertake work for their employer while they are furloughed. 
  • It is available to employees on the payroll at 28 February 2020.
  • The employer needs to get agreement from the worker to do this, unless it’s covered by a ‘lay off’ clause in the employment contract. 
  • The employer needs to submit information to HMRC about the employees that have been furloughed and their earnings. The submission will be through a new online portal which is expected before them end April (HMRC will set out further details on the information required). 
  • If an employee’s salary is reduced as a result of these changes, the employee may be eligible for support through the welfare system, including Universal Credit. 
  • For employees on zero-hour contracts, the employer can use the monthly pay in February 2020 as a benchmark for each person’s pay when furloughed. If any employee did not work in that month, they should claim Universal Credit. 
  • If employees have to stay at home to look after young children, the employer is likely to be allowed to claim compensation if they furlough these workers. 

The Coronavirus Job Retention Scheme will run for at least 3 months from 1 March 2020 but will be extended if necessary. 

HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. 

It is expected that employers borrow or self-fund in the short term to provide the wage package. 

If a business needs short term cash flow support, it may be eligible for a Coronavirus Business Interruption Loan. 


We are expecting an announcement for the self employed from the Government imminently but from commentary out there at the moment and an ACCA update it appears the package may look something like the following.

The draft legislation Coronavirus Bill 2019-21 include an amendment to support self-employed people a statutory self-employment pay. 

The draft amended legislation is: 

“Statutory self-employment pay 

(1) The Secretary of State must, by regulations, introduce a scheme of Statutory Self Employment Pay. (2) The scheme must make provision for payments to be made out of public funds to individuals who are
     (a) self-employed, or 
     (b) freelancers. 

(3) The payments to be made in subsection (2) are to be set so that the net monthly earnings of an individual specified in subsection (2) do not fall below— 
     (i) 80 per cent of their monthly net earnings, averaged over the last three years, or 
     (ii) £2,917 whichever is lower. 

(4) No payment to be made under subsection (2) shall exceed £2,917 per month. 

(5) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of either House of Parliament. The purpose of this amendment is to make the Government ‘top up’ self-employed workers’ earnings to the lower of 80% of their net monthly earnings averaged over three years, or £2,917 a month. The passage of the Bill may result in other amendments or even removal of the above

Again, this is just proposed legislation at the moment and has not been passed but the Government is working to announce some measures to support the self employed and as soon as we have more detail on this we shall let you know.


Following last week’s update, further details have emerged on the Coronavirus Business Interruption Loan Scheme (CBILS). 

  • Applications are now open to all SME businesses in all industries (except excluded organisations) and resources have been trebled to process the increased demand expected for these loans. 
  • SMEs will qualify if turnover does not exceed £45m and number of employees does not exceed 250. Applications can be made with your bank directly (there are currently 40 accredited lenders and the British Business Bank will be working to accredit new lenders) and SMEs will pay no arrangement fees to access this finance. 
  • Schemes will be available for both term loans of up to 6 years and overdraft or invoice financing for up to 3 years. 
  • The government will pay for any lender-levied fees and cover interest payments for the first 12 months, lowering the initial repayments for smaller businesses. 
  • In addition, some lenders are likely to offer capital deferment schemes of up to 6 months as well. Term loans from £10,000 to £5m will be available under this scheme for a maximum repayment period of 6 years. Overdraft and invoice financing to ease working capital requirements will be available for a maximum period of up to 3 years. 
  • Borrowings of up to £250,000 can be accessed without security, at the lender’s discretion, and whilst the lenders will have a government-backed guarantee of 80% of the loan value, the borrowers will be liable to repay 100% of the debt. 
  • Importantly the scheme does not require personal guarantees of a Directors PPR, this is though at the discretion of lenders. 
  • Lending decisions will be based on most existing lending criteria and businesses will be expected to have been viable before CV19 and have a positive outlook medium to long term (traditional lending criteria such as customers and profits). 
  • Many lenders are stating that they will only look at businesses they currently support, and we have also had reports that some lenders have amended lending policies and criteria. 
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