Proprietary directors, or business owners, are being reinstated to the Employment Wage Subsidy Scheme (EWSS) from 1 September, where they retain "ordinary" employees on payroll.
Minister for Finance Paschal Donohoe confirmed that he has asked his Department to review the provision with the Revenue Commissioners during August to achieve this objective, while also protecting the integrity of the EWSS.
The Department said that around 90% of company directors retain ordinary employees and therefore will now be included in the scheme.
Business owners had expressed anger over the decision to exclude company directors from the new Covid wage subsidy scheme.
They said many of them were facing the prospect of having to work without pay come September.
Mr Donohoe said: "Over the past 48 hours I have listened to the concerns of certain proprietary directors in relation to provisions of the EWSS.
"They have been using the Temporary Wage Subsidy Scheme (TWSS) to retain 'ordinary' employees in their business over recent months and they would wish to continue to do so under the new EWSS.
"Having considered the points raised with me, I have decided to ask the Revenue Commissioners to reinstate proprietary directors to the EWSS from 1 September where they are retaining 'ordinary' employees on their payroll."
He said the EWSS is an economy wide support for employers and a "key element of the Government's July Jobs Stimulus, the focus of which is on measures that immediately and directly support the economy and help to actively retain and create jobs".
The Minister said the Revenue Commissioners will issue guidance in good time for the commencement of the scheme on 1 September.
As part of the July Stimulus package released on 23 July, the Government announced the introduction of the new subsidy which will apply from 31 July until the end of March 2021.
The new scheme will run concurrently with the existing Temporary Wage Subsidy Scheme (TWSS) until 31 August at which stage the TWSS will cease.
The new EWSS extends the definition of eligible employee to now include an individual who is on the payroll of the employer at any time in the "qualifying period" ie between 1 July 2020 and 31 March 2021.
But this excluded an individual who is a proprietary director of the company and someone who is connected with the employer (unless such connected person was on the payroll of the employer between 1 July 2019 and 30 June 2020 and received pay from the employer during that time).
Chief executive of the Restaurants Association of Ireland, Adrian Cummins said around 20,000-30,000 businesses would have been affected across the country.
When his business closed temporarily due to Covid-19, Karl Purdy, owner of Coffeeangel adapted by delivering bags of coffee to people's homes. He has since reopened his coffee chain in Dublin.
Mr Purdy is delighted that the Finance Minister has decided to reinstate proprietary directors to the EWSS.
"Well done and thanks to so many who weighed in on turning this around!" he tweeted.
Earlier Mr Purdy had told RTÉ: "For small business owners it was kind of kicking us when we're down. For us, we are just trying to see the rest of the year through.
"The Wage Subsidy Scheme has been a huge help and support for us getting through each day, numbers are down and it just makes it more difficult to survive.
"We've cut and we've changed to this Covid world and our staff numbers are down, as low as we can get them. Sometimes that's even too many for the customers we have.
"We'll find a way, I'm an eternal optimist, it just makes things much more difficult."
He added: "People like me and all small business owners across the country are coming in every day, we're sweeping floors and for me, grinding coffee. So I think its going to be tough but we will get through it."
Additional reporting John Kilraine