Sir Philip Green's Arcadia retail empire has apologised after claims it would pay some head office staff only half of their notice pay.
Arcadia, whose High Street brands include Topman, Topshop and Dorothy Perkins, said it was "extremely sorry".
All affected employees would get full pay, the firm said.
The Unite union, which had threatened legal action, said billionaire Sir Philip should not have allowed the situation to happen in the first place.
High Street retail is one sector of the UK economy that has been hit hard by the coronavirus crisis, with shop closures during lockdown followed by reduced footfall in shops.
While retail sales rebounded in July, rising above pre-pandemic levels, the ONS said clothing shops had been the worst hit during the pandemic and the volume of sales remained 25.7% lower than in February.
Arcadia, which is cutting 300 jobs from its head office in response to the effects of the pandemic, said on Saturday:
"We recently implemented a policy for those employees who are working their notice on furlough to receive their furlough pay instead of their full pay.
"We got this decision wrong and the board has today amended this policy to ensure all affected employees will receive their full pay.
"We are extremely sorry to all those individuals [affected] for the distress that we have caused and apologise unreservedly."
To try to soften the coronavirus blow to the economy, in March the government put in place the Coronavirus Job Retention Scheme, which paid 80% of the wages of workers placed on leave, up to a maximum of £2,500 a month.
That scheme has been winding down and, from the beginning of September, companies using the scheme have had to start contributing to workers' wages.
Arcadia Group became part of Taveta Investments, owned by Sir Philip and his family, in 2002.
The statement said it had been forced to make "many tough decisions" during the coronavirus pandemic, including the restructuring of its offices.
The Unite union had threatened legal action on behalf of more than 40 head-office staff over pay after claims it was paying them only 50% of their notice pay. It hailed the "U-turn" by Arcadia as a victory for employees.
Unite regional officer Debbie McSweeney said it was "almost without precedent for Arcadia to apologise for such behaviour towards employees".
"But this situation should have never been allowed to happen in the first place by Sir Philip Green, one of the country's richest men," she said.
Unite said it would examine the Arcadia statement in detail before finally deciding to withdraw its legal action.