Workers will continue to receive 80 per cent of their salary, up to a maximum of £2,500 a month.
From August, employers currently using the scheme will be able to bring furloughed employees back to work on a part-time basis, with employers being asked to pay a percentage towards the salaries of their furloughed staff.
Sunak said: “Until the end of July there will be no changes whatsoever. Then from August to October the scheme will continue for all sectors and regions of the UK but with greater flexibility to support the transition back to work.
“Employers currently using the scheme will be able to bring furloughed employees back part-time and we will ask employers to start sharing with the government the cost of paying people’s salaries.”
Some 7.5 million people have been furloughed since the job retention scheme launched in late April and nearly one million businesses supported, Sunak said.
The Coronavirus Job Retention Scheme was originally due to run until June. In its first two weeks, it cost the government £8bn.
Mike Cherry, national chairman of the Federation of Small Businesses, said: “The Job Retention Scheme is a lifeline which has been hugely beneficial in helping small employers keep their staff in work, and it’s extension is welcome.
“Small employers have told us that part-time furloughing will help them recover from this crisis and it is welcome that new flexibility is announced today.”
The TUC tweeted: “The government has listened to unions and extended the job retention scheme till autumn.
“Government will still cover 80 per cent of wages and has changed the rules to support short-time working, which is key to a gradual, safe return to work.
“A big relief to millions of working families.”