But employers will be expected to pay a percentage towards the salaries of their furloughed staff from the start of August.
Around 7.5 million jobs have been furloughed across all industries with workers receiving 80% of their current salary.
From August 1 furloughed workers will be able to return to work part-time with employers starting to pick-up part of their salary again.
Chancellor Rishi 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.”
Almost 1 million businesses – including thousands of construction companies – are using the scheme.
It 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.
HM Treasury said: “More specific details and information around its implementation will be made available by the end of this month.”
New statistics also show that businesses have benefitted from over £14 billion in loans and guarantees to support their cashflow during the crisis.
This includes 268,000 Bounce Back Loans worth £8.3 billion, 36,000 loans worth over £6 billion through the Coronavirus Business Interruption Loan Scheme, and £359 million through the Coronavirus Large Business Interruption Loan Scheme.