Chancellor Rishi Sunak has announced a new scheme that could cost up to £9 billion to encourage employers to bring back the workers they furloughed.

Mr Sunak said that the furlough scheme cannot go on indefinitely and will be wrapped up in October, but promised to pay companies £1,000 for each employee if they take back the staff that they sent home as part of the scheme.

The jobs retention bonus will be paid to companies if they keep the employee in work until January, and pay them at least £520 per month, on average.

If all furloughed workers are taken back by their employer the scheme will cost the Government £9 billion, the Chancellor said.

“Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before,” he told MPs.

Our message to business is clear: if you stand by your workers, we will stand by you

“The longer people are on furlough, the more likely it is their skills could fade, and they will find it harder to get new opportunities. It is in no-one’s long-term interests for the scheme to continue forever, least of all those trapped in a job that can only exist because of Government subsidy.

Mr Sunak added: “Today, we’re introducing a new policy to reward and incentivise employers who successfully bring furloughed staff back – a new jobs retention bonus.

“It’s vital people aren’t just returning for the sake of it – they need to be doing decent work. So for businesses to get the bonus, the employee must be paid at least £520 on average, in each month from November to the end of January.

“Our message to business is clear: if you stand by your workers, we will stand by you.”

More than 9.4 million people have been put on furlough, with the Government covering up to 80% of their salaries, at a cost of £27.4 billion, according to the latest figures.

Kate Nicholls, the head of trade body UK Hospitality, said: “This is hugely positive and allows us to be able to transition people from furlough back to employment in hospitality – key as we face prolonged suppressed revenues and 1.5 million still furloughed.”

However, others warned that the scheme may not be enough.

Only nine in 10 workers who have been furloughed made above £520 at any point during the 2019/20 financial year – let alone averaging that amount.

The employee must be continuously employed until January 31 next year.

Federation of Small Businesses (FSB) national chairman Mike Cherry said: “We’ve always said that the Chancellor should take a jobs-first approach to today’s intervention and that’s exactly what he’s done.

“The job retention bonus must be easy to access. We can’t have paperwork holding up this vital support.”

Labour’s shadow chancellor Anneliese Dodds said: “The Chancellor still needs to abandon his one-size-fits-all approach to withdrawing the job retention and self-employed schemes.

“No one is saying these schemes should stay indefinitely. No one is saying that on this side of the house. But we have said that the money spent on the Job Retention Scheme must not serve merely to postpone unemployment.

“The scheme must now live up to its name – supporting employment in industries which are viable in the long term. And we need a strategy for the scheme to become more flexible, so it can support those businesses forced to close again because of additional localised lockdowns.

“There is still time to avoid additional floods of redundancy notices. It’s the Government’s duty to help Britain through this and stop unemployment at mass levels again.”