The Covid-19 job support scheme has been given an overhaul by chancellor Rishi Sunak, with employer contributions reduced and the minimum hours requirement also cut.

Speaking in the Commons, Sunak said employer contributions for hours not worked due to coronavirus restrictions will fall to 5%. Workers will only have to work 20% of hours, he said.

The uplift in support from the Treasury means workers can get 73% of their wages for a minimum of 20 hours. 

But the measures were described by Labour as a “sticking plaster” for the economy amid fears mass joblessness beckons. 

The new JSS support means a typical employee in the hospitality industry paid an average of £1,100 per month will still take home £807, the government said. 

Outlining details to MPs, Sunak said: “For businesses who can open it is now clear the impact of restrictions on them particularly in the hospitality sector is more significant than they had hoped. 

“So, I am making two changes to the short-time work scheme to make it easier for those businesses to keep staff on rather than make them redundant. 

“First, under the original scheme employees had to work for 33% of their normal hours. Now we will ask them to work only 20% of those hours.

“Second, the employer contribution for the hours not worked will not be 33% as originally planned, or even 20% as it is in the October furlough scheme, it will reduce to 5% and the scheme will apply to eligible businesses in all alert levels.”

Sunak also unveiled more backing for the self-employed, with the maximum grant available raised to £3,750. 

He added: “I’m increasing our contribution to the incomes of the self-employed as well. Today we are doubling the next round of the self-employed income support from 20% to 40% of people’s incomes, increasing the maximum grant to £3,750.” 

There will also be grants of £2,100 available for firms in tier 2 areas of England, primarily aimed at helping hospitality and leisure venues which have seen takings plummet due to a restrictions on households mixing.

He told MPs: “It will be up to local authorities to decide how best to distribute these grants, giving them the necessary flexibility to respond to local economic circumstances.

“But I am providing enough funding to give every business premises in the hospitality, leisure and accommodation sectors a direct grant worth up to £2,100 for every month tier 2 restrictions apply.

“That is equivalent to 70% of the value of the grants available for closed businesses in tier 3.”

He also used a speech in the Commons to speak directly to people hit by tier 3 restrictions, where hospitality venues have been closed. 

He said: “I understand your frustration, people need to know this is not forever. These are temporary restrictions to help control the spread of the virus.

“There are difficult days and weeks ahead, but we will get through this together. People are not on their own. We have an economic plan that will protect the jobs and livelihoods of the British people wherever they live and whatever their situation.”

London Mayor Sadiq Khan said the measures were a “sticking plaster” rather than a solution to the problems faced by the economy.

He said: “The changes announced today are a welcome improvement to the flawed and narrow job support scheme announced last month.

“These should have been in place from the start – instead, businesses and workers have been put through weeks of uncertainty.

“This latest announcement is just a sticking-plaster solution that still fails to match the true scale of the problem.

“The collapse of tourism into London has impacted heavily on footfall and left many hospitality, retail and leisure businesses without any prospect of returning to normal levels of business for many months to come.

“The government needs to get its act together and provide a functioning test and trace system so the economy can be further reopened, safely.”