Workers can have some their lost wages covered by the government for six months if their hours are reduced, Rishi Sunak has announced.
The measure forms part of the chancellor’s winter economic plan and replaces the furlough scheme, which expires next month.
To be eligible employees will have to work a minimum of 33% of their normal hours.
For the remaining hours not worked, the government and employer will each pay one third of the remaining wages.
It means someone working 33% of their hours will receive at least 77% of their pay.
Under the programme it means employers will pay 55% of the wages of someone working a third of their normal hours.
The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.
Speaking in the Commons, Sunak said the “resurgence” of coronavirus posed “a threat to our fragile economic recovery”.
“Our approach to the next phase of support must be different to that which came before,” the chancellor said.
“The primary goal of our economic policy remains unchanged - to support people’s jobs - but the way we achieve that must evolve.”
In a warning to the public, the chancellor said he “cannot save every business” and “cannot save every job”.
Defending his decision to end the furlough programme, Sunak said the government had to focus on saving “viable” jobs.
“As the economy reopens it is fundamentally wrong to hold people in jobs that only exist inside the furlough,” he told MPs.
Sunak also extended the self-employment income support scheme and 15% VAT cut for the hospitality and tourism sectors, and help for businesses in repaying government-backed loans.
The chancellor delivered his plans in the Commons, but Boris Johnson was not there to support him as he was visiting police recruits in Northamptonshire.
Downing Street denied speculation about a rift between at the top of Government, insisting there was “absolutely not” a problem between Johnson and Sunak.