Since 6 April 2020, employers can receive compensation for wage costs on the basis of the “Temporary emergency measure transitional regulation for preservation of employment” (“NOW”). In previous articles, we discussed the contents of the NOW, some important adjustments to the regulation, the widening of the NOW for groups of companies and a third change that has made the NOW accessible for more companies. The NOW has now been extended for the months of June, July, August and September 2020. The new regulation was published on 25 June. This extension involves some changes, the most important of which we will discuss below.
System of the NOW
In the second tranche, the system of the NOW remains largely unchanged. Employers who are faced with a decline in turnover of at least 20% receive a subsidy to cover the wage costs. In the event of a complete loss of turnover, the subsidy amounts to 90% of the wage bill. If the loss of turnover is less than 100%, the compensation is applied on a pro rata basis. The UWV provides an advance payment of 80% of the amount of subsidy. The eventual amount of the subsidy will be determined with hindsight.
If the amount of subsidy is €125,000 or more, or the advance is €100,000 or more, the applicant is obliged to submit an auditor's report about the decline in turnover upon the final determination of the subsidy. For lower amounts, the statement of an expert about the decline in turnover will be required, depending on the amount of subsidy.
Changes to determination of subsidy compared to the first tranche
- The period for which the employer will receive a subsidy has been extended from three to four months (June to September inclusive 2020).
- The four-month period in which there must be a decline in turnover commences either on 1 June, or on 1 July or on 1 August 2020. If the NOW 1.0 has also been applied for, this four-month period must immediately follow the period of decline in turnover on which the applicant has based his application under the NOW 1.0.
- The fixed surcharge to cover employers’ costs (social security contributions, pension premium, holiday allowance) has been increased from 30 to 40%. This gives businesses more financial room to keep paying the salaries and to meet other expenses necessary to keep the business alive, and thus preserve employment.
- It has been agreed that the reference month for determining the wage bill will be March 2020.
Additional conditions
- In general, employers are obliged to make an effort to encourage employees to undertake training and retraining. This obligation has not been further specified.
- With regard to the year 2020, an employer who receives a subsidy of €125,000 or more, or an advance of €100,000 or more, is not allowed to distribute profits to shareholders, pay out bonuses to the board and management of his own company, or purchase own shares. The terms board and executive board (or management) must be interpreted broadly.
- If the NOW is used for operating companies, the lower limit mentioned above does not apply. In that case, the said prohibition is also directed at the group head or the parent company of the applicant. It makes no difference whether the business concerned has its registered office abroad. When making the application, the employer must represent that the group head or the parent company will comply with this obligation.
Dismissal penalty
If the employer files an application for dismissal with the UWV for 20 employees or more within the period between 30 May 2020 and 30 September 2020, which compels the employer to make a notification as envisaged in the Collective Redundancy Notification Act (“WMCO”), the total amount of the subsidy will be lowered by 5%. The employer may prevent this cutback in two ways:
- Either the employer reaches agreement with all stakeholder trade unions (or if there are none, with another representation of employees) about the necessity of the number of jobs to be cut; or,
- if no agreement is reached, the parties may jointly request the Labour Foundation (Stichting van de Arbeid) to assess whether the proposed number of jobs to be cut is necessary.
The 5% cutback on the overall subsidy applies besides the existing rule that the subsidy will be lowered if the employer asks the UWV's permission for dismissal within the subsidy period. In that case, the subsidy will be lowered (roughly speaking) by 90% of the wages of the employees whose dismissal is applied for, increased by the fixed surcharge, times 3. The cutback therefore concerns a period of three months, rather than the entire subsidy period of four months. This choice was made in order to prevent a double count in connection with the adjustment for a lower wage bill. The additional 50% cutback has been cancelled.
Conclusion
Applying for an advance payment under the NOW 2.0 is expected to be possible starting from 6 July 2020. Requests for determinations of the first and second tranches of the NOW can be filed simultaneously after 15 November 2020. Besides, starting from 7 October 2020, it will already be possible to apply for a determination of the subsidy for the first tranche.
It is not clear whether we will see yet another extension after the end of the NOW 2.0. According to Minister Koolmees, the current extension of the NOW by 4 months offers “more time and space to arrive at a consistent and feasible package for the next phase.” What this package will look like is still not sure.
Do you have any questions about the NOW regulation and/or specifically about the above changes? Please feel free to contact the Employment Law team.
