Chancellor Rishi Sunak has extended the Coronavirus Job Retention Scheme (JRS) until the end of October.
Mr Sunak confirmed that employees will continue to receive 80% of their monthly wages up to £2,500.
However, the Chancellor said companies will need to start sharing the cost of the scheme from August.
The scheme will continue from August to October but with greater flexibility to support the transition back to work.
Employers currently using the scheme will be able to bring furloughed employees back part-time during this period.
Commenting on the extension, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB) said 'Extending the JRS and allowing small firms to furlough staff on a part-time basis will protect thousands of livelihoods over the months ahead.
'Our members have been telling us loud and clear that the ability to furlough staff on a part-time basis will be central to aiding gradual recovery at a time when economic activity is still in the doldrums.
'We await further detail on the contributions that will be required of small employers after July. We need to ensure that those obligations are affordable for the many businesses that have had no revenue coming in for months now, but still have fixed overheads to worry about.'