With unemployment predicted to hit 3m, the Confederation of British Industry (CBI) has announced its plans for an alternative to redundancy.

The Alternative to Redundancy (ATR) scheme is a temporary measure aimed at employers, who can no longer afford to keep workers on, but where there was a realistic of their jobs being sustainable within a few months.

Under the proposals, the employees would receive Jobseekers Allowance for up to six months, with the employer at least matching this, John Cridland, the CBI’s deputy director general, told a London news conference last week.

If demand picked up, the staff could be re-employed by the company. However, where the job remained unviable, the employees would be entitled to all statutory benefits, including redundancy. Individuals would remain free to take up alternative jobs.

Cridland said the scheme would help those employers who were “hanging on to staff” but because demand hadn’t yet picked up faced having to get rid of them as they ran out of cash.

The timing was opportune because “there was light at the end of the tunnel for businesses and the economy”, said Cridland. “No employer wants to get rid of staff when they believe things are about to improve in three months time,” he said. And, he added, it would avoid “the worst sin” which was to have to “rehire staff again after three months”.

Cridland told Recruiter the scheme would “soften the blow” of rising unemployment and would be particularly attractive to small firms, mainly in manufacturing. The scheme would require legislation, and Cridland said he hoped it would be working by the autumn.