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If mass redundancies are to be avoided, flexibility in the furlough scheme will need to be brought forward sooner and businesses will need more financial support, a group of MPs has been told.

Giving evidence to a Business, Enterprise and Industrial Strategy Committee hearing this morning, TUC deputy general secretary Paul Nowak suggested a number of organisations had “jumped the gun” on redundancies that could have been avoided had increased flexibility in the Coronavirus Job Retention Scheme been introduced sooner.

On Tuesday, chancellor Rishi Sunak announced that the scheme would be extended to the end of October. From August firms may bring staff back to work part time, but employers would have to share the cost.

But Nowak said bringing forward some of that flexibility would avoid “unintended consequences”, such as redundancies, and would save money for the tax payer.

Tej Parikh, chief economist at the Institute of Directors, agreed there needed to be greater flexibility as people are urged to return to work where possible.

“[Employers] need to be able to bring different groups of staff on, whether that’s front-facing staff or back office staff very quickly, and right now there’s a three-week minimum period for furlough… that doesn’t really give businesses the flexibility to bring staff back the way they need,” he said.

Nowak said: “I know one large employer where staff are on furlough, [and] they’ve had to bring in agency workers to get the plant ready [for the return to work] because the staff who are on furlough can’t do any work at all.”

Nowak also claimed that many workers who he thought should be eligible for furlough were “falling between the cracks” in the scheme, including agency workers and those on zero-hours contracts.

In order to avoid further redundancies, especially when employers are asked to pick up some of the wage bill for furloughed staff from August, Parikh called for a continuation of the financial support that had been offered to employers – including loans, grants and business rate suspensions.

“They are still trying to manage the fall-out from the coronavirus, so any support they can get… will help them,” he said.

“The job retention scheme extension is welcome, but the next step is… working with businesses to help them fully understand how much they will be asked to put forward. Because at that stage, if demand and revenue hasn’t picked up, you wouldn’t want to be increasing business cost.”

Parikh said 40% of IoD members wanted to see further tax relief and support, as “a lot of businesses will be facing their most intense cashflow and liquidity challenges”.

Tax relief to help individuals retrain while on furlough may help avoid mass job losses, especially in sectors currently shut down because of the lockdown.

“[We] should look at investment incentives, [either to] support workers in coming back, or for investing in things like technology and automation,” added Parikh.

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