The Employment Bridge Emergency Fund: COVID-19 announcements (31 March 2020)
The Employment Bridge Emergency Fund (Noodfonds Overbrugging Werkgelegenheid; NOW)
On 17 March 2020, the Dutch government announced several financial measures in response to the COVID-19 outbreak. One of them is the NOW (as explained in our earlier briefing of 18 March 2020). The aim of the NOW is to provide temporary relief to employers to allow them to continue employing their employees during the outbreak and prevent redundancies as much as possible.
On 31 March 2020, the Dutch Ministry of Social Affairs and Employment published the more detailed terms and conditions of the NOW. In short, employers who suffer a loss of turnover of at least 20% are eligible to receive a compensation towards their labour cost of at maximum 90%. The level of compensation is determined by reference to the actual loss of turnover: i.e. in case the loss in turnover is 100%, the compensation is 90%, if the loss in turnover is 50%, the compensation is 45% etc.
In the below, we have set out the most important conditions of the NOW.
Loss of turnover
- Employers must suffer a loss of turnover of at least 20% during three consecutive months in the period between 1 March 2020 and 1 August 2020.
- The start date of the three-month period is in principle 1 March 2020, but where employers expect the consequences of the outbreak to only manifest themselves later on, they can use a start date of 1 April or 1 May 2020, instead of the 1 March 2020 date, for the three-month period. Note, however, that the labour costs will always be determined by reference to the wage sum over March, April and May 2020.
- The actual loss of turnover is determined by taking the difference between the turnover during the relevant three-month period and the so-called reference turnover. The ‘reference turnover’ is calculated by dividing the employer’s total turnover over 2019 by four.
- Starting point is that the loss of turnover is determined per legal entity. However, where the employer forms part of a group of legal entities, the loss of turnover of the entire group (as in place on 1 March 2020 and including non-Dutch entities with employees on a Dutch payroll) is decisive. This means that if the group as a whole has a loss of turnover of less than 20%, the individual entities of the group will not be eligible to receive compensation.
- The Dutch Labour Authorities (UWV) will use the data of the January 2020 payroll tax declaration filed with the Dutch tax authorities (Belastingdienst) to determine the total wage sum used to calculate the advance payment of the compensation. The UWV will use the so-called ‘social insurance wage’ as a basis.
- The wage to be compensated is maximized at EUR 9,538 gross per employee per month. Salary above this amount will not be taken into account for the calculation of the compensation.
- A 30% surcharge will be added to this amount to ensure that also employer charges such as the accrual of holiday pay, pension costs etc. are compensated.
- The NOW applies to the wages of all employees for whom a payroll tax declaration is filed and who are insured under the Unemployment Benefits Act (WW), the Health Insurance Act (ZW) and the Occupational Disability Act (WIA). This means that also the salary of flexible employees (including temporary and on-call employees) will be compensated.
- If the wage sum over March, April and May 2020 is lower than the January 2020 data used to calculate the advance payment, the final compensation will be lower, and the employer may be required to repay part of the advance payment. A higher wage sum in March, April and May will not lead to a higher final compensation (in order to prevent abuse).
Employers who receive a compensation, are required to comply with certain conditions, including:
- as much as possible continue to pay the regular wages.
- Where it concerns “regular” employees, employers are by law required to continue to pay 100% of their wage (unless agreed differently). For flexible workers, this may not be the case. As their salaries will also be taken into account in the wage sum used for the calculation of the compensation under the NOW, employers are incentivized to continue to pay their wage (regardless of a legal obligation to do so). If these employees are not paid, this may lead to a reduction of the wage sum for the compensation period and result in a retro-active reduction of the NOW compensation and obligation to repay part thereof.
- committing to not implement any redundancies based on economic reasons during the period when the compensation is being received.
- If the employer nevertheless implements redundancies based on economic circumstances during this period, a penalty will be imposed in the sense that the wage sum taken into consideration for compensation will be decreased by 150% of the wages of the relevant employee(s).
- Dismissal requests filed prior to17 March 2020 will not have an impact.
- Dismissal requests filed in the period between 17 March 2020 and 1 April 2020 may be revoked within five days as of 1 April 2020, in which case they will not impact the compensation as set out above.
- Dismissal requests filed after 1 April 2020 may be revoked within five days of having been filed in order to prevent the above-mentioned impact.
- For the avoidance of doubt: dismissals for other reasons (e.g. performance) are not prohibited and the employer may also decide not to extend a temporary employment agreement.
- using the compensation only to pay the relevant wages.
- informing the works council or employee representative body about the compensation.
- Companies can submit their application for the NOW with the UWV as of 6 April 2020. Applications may be made until 31 May 2020.
- The government will prior to 1 June 2020 assess whether the NOW will be prolonged, and if so, whether additional conditions will be imposed.
- As mentioned, if the request is honoured, an advance payment equal to 80% of the estimated compensation will be paid to the employer in three instalments. The first part of the advance will most likely be paid within two to four weeks after the submission of the application (but is expected to be done more quickly for most of the companies).
- The employer is required to request a final determination of the definitive amount of the compensation within 24 weeks after expiry of the relevant three-month period, thereby submitting details of the actual loss of turnover (including an audit report by the accountant) and the actual wage sum. The authorities will give a final ruling within 52 weeks after receipt of the relevant request.
Should you require further information in relation to any of the above, like to discuss the strategical aspects of whether or not to request compensation under the NOW or require our assistance in requesting the compensation, please contact us.