The UK government’s Coronavirus Job Retention Scheme will remain open until the end of October, Chancellor Rishi Sunak announced on Tuesday.
Sunak said the furlough scheme would be extended by a further four months with workers continuing to receive 80% of their current salary.
From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.
The employer payments will substitute the contribution the UK government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.
Sunak said: “Our Coronavirus Job Retention Scheme has protected millions of jobs and businesses across the UK during the outbreak – and I’ve been clear that I want to avoid a cliff edge and get people back to work in a measured way.
“This extension and the changes we are making to the scheme will give flexibility to businesses while protecting the livelihoods of the British people and our future economic prospects.”
The job retention scheme has helped 7.5 million workers and almost a million businesses.
The scheme will continue in its current form until the end of July and the changes to allow more flexibility will come in from the start of August.
Mike Cherry, National Chairman of the Federation of Small Businesses, said: “The Job Retention Scheme is a lifeline which has been hugely beneficial in helping small employers keep their staff in work, and it’s extension is welcome.
“Small employers have told us that part-time furloughing will help them recover from this crisis and it is welcome that new flexibility is announced today.”
CBI Director-General Carolyn Fairbairn said: “The Chancellor is confronting a challenging balancing act deftly.
“As economic activity slowly speeds up, it’s essential that support schemes adapt in parallel.
“Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs.
“Introducing much needed flexibility is extremely welcome.
“It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation.
“That’s essential as the UK economy revives step-by-step, while supporting livelihoods.
“Firms will, of course, want more detail on how they will contribute to the scheme in the future and will work with government to get this right.
“Above all, the path of the virus is unpredictable, and much change still lies ahead.
“The government must continue to keep a watchful eye on those industries and employees that remain at risk.
“All schemes will need to be kept under review to help minimise impacts on people’s livelihoods and keep businesses thriving.
“The greater the number of good businesses saved now, the easier it will be for the economy to recover.”