A report from the employers’ organisation recommends that the government allows firms to have the choice between making a worker redundant or entering them on an ATR scheme for six months.

Once on the programme, the employee does not work, but receives compensation worth twice the rate of jobseekers allowance, with the firm contributing one half and the government the other.

The CBI claims that advantages of the ATR scheme include allowing companies to retain skills during the recent sharp fall in demand without creating any extra cost to the government.

John Cridland, CBI deputy director general, comments: ‘Businesses still face a long convalescence and the dole queues will continue to grow. The Alternative to Redundancy scheme could save jobs by giving businesses more leeway as the economy recovers.’

Commenting on the suggestion, Trades Union Congress general secretary Brendan Barber says there is concern over the details of the scheme, such as whether workers who use it lose their redundancy rights.

He also says that it is better to keep people in work and training for as long as possible and adds that wage subsidies may be a more realistic way for the UK to tackle its unemployment problem.