Chancellor Rishi Sunak has extended the furlough scheme for one month until the end of April next year.
He said the move would provide “certainty for millions of jobs and businesses”.
It means the government will continue to pay 80% of the wages of workers who have been furloughed.
Mr Sunak also confirmed he would be extending the government-guaranteed Covid-19 business loan schemes until the end of March.
These changes come in the run-up to the next Budget, which the chancellor confirmed would take place on 3 March 2021.
The government will continue to pay 80% of the salary of employees for hours not worked until the end of April.
Employers will only be required to pay the wages, National Insurance (NI) contributions and pensions for hours worked, as well as NI contributions and pensions for hours not worked.