Coronavirus and short-time working: how does it work?

17 Mar 2020

The coronavirus outbreak has a huge impact on Dutch society. Many employers are faced with a steep decline in the amount of work available. This article provides a clear overview of the Short-time working provision.

Hylda Wiarda, Jasper Pot

Dutch law prohibits employers from unilaterally reducing the working hours of its employees, insofar as it also decreases the employee’s salary. It is possible to apply for an exemption of this prohibition with the Dutch Minister of Social Affairs and Employment.

This exemption will be granted if employers meet the following cumulative criteria:

  • During at least 2, but no more than 24 calendar weeks ;
  • at least 20% of the working capacity (meaning working hours of employees) cannot be utilised;
  • due to a decrease in business activity caused by extraordinary circumstances;
  • that cannot reasonably be attributed to the regular entrepreneurial risks.

If the employer meets these criteria, permission to reduce the working hours of employees will be granted, in principle, for a period of six weeks. We share the opinion that employees whose working hours are reduced will in principle not be entitled to continued payment of their salary for the reduced working hours, unless otherwise specified in the individual employment agreement, personnel handbook or CLA. It is however reasonable, based on the principle of being a good employer, to continue paying (a part of) the employees’ salary - up to the amount of the expected unemployment benefits - in advance. The government has announced that the regulations on short-time working will be expanded soon. We expect that this will include this exact matter. 

The application

In the application for exemption, the employer must indicate the number of employees currently employed  and how many working hours they collectively have. Temp-workers, employees with a contract for zero hours and independent contractors are excluded from this list. Short-time  working is also available for temp agencies and payroll companies, insofar as the employee works a set amount of hours. The employer must then include in the application for exemption how many employees will be working reduced hours, as well as the amount of reduced hours worked by the employees collectively.

The coronavirus outbreak meets the criteria of being an extraordinary circumstance that cannot reasonably be attributed to the regular entrepreneurial risks. However, employers will need to substantiate that it is in fact due to the coronavirus that the business activity has  decreased and that this is not due to any other factor.

Duration of the exemption

The exemption is granted for a period of six weeks initially. After the first period of six weeks, an employer may apply for  an extension, up to a maximum of three . The extension can be granted for a period of six weeks each time, culminating in a total exemption period of 24 weeks.

No waiting period

There have been reports circulating that there is a waiting period of two weeks for the exemption, during which the employer is obliged to continue to pay  100% of the employees’ salary. We are of the opinion that this is incorrect. Exemption will be granted retroactively as per the date of the application. There is no waiting period. If no exemption is granted (yet), the employer must continue to pay the employees’ salary, since the employer is not (yet) entitled to reduce the working hours and salary of the employees.

If exemption is granted however, the exemption enters into effect as of the date on which the application is made. In that case, there is no waiting period of two weeks during which the employer must continue to pay  100% of employees’ salary.

Impact on employees – (partial) unemployment benefits

The reduction of working hours has a great impact on employees. Not only are they obliged to work fewer hours, but their salary payments for those hours are also stopped. In order to (partially) mitigate this decrease in salary, the employer can request unemployment benefits on behalf of the impacted employees.

In order to request the unemployment benefits, the employer must notify the Employee Insurance Agency (UWV) as soon as the exemption is received. This way the UWV is aware that the Minister has granted exemption for that employer and that the employer is therefore authorized to request unemployment benefits for the impacted employees.

The employer must then file the request for unemployment benefits within one week following the period of exemption of six weeks on behalf of the employees. The UWV will assess the request, during which the UWV will ascertain whether or not the employees meet all relevant criteria for unemployment benefits. Only during the first period of exemption of six weeks does the criterion of being available for other employment not apply.

If the employee meets all relevant criteria, the UWV will grant the employees unemployment benefits, which will be paid out to the employer. The employee does not have to give his/her consent to file the application on his/her behalf. The employees will use up the unemployment benefits entitlements they have accumulated up until that point. The employer pays the salary for the worked hours during the period of exemption and shall pay the unemployment benefits for that period of six weeks following that period. Note: it is reasonable, based on the principle of being a good employer, to continue paying (a part of) the employees’ salary – to the amount of the expected unemployment benefits – in advance.

Sick employees

If an employee is sick at the time of filing the application for an exemption, the employee will not be eligible for unemployment benefits. The continued payment of salary during illness will be maintained for these employees. If the employee falls ill during the period of exemption however, the employee is eligible for unemployment benefits, provided the employee meets all other criteria for unemployment benefits. This will lead to a reduction in salary costs for the employer. We advise employers to apply for short-time working for all employees, sick or not sick, despite the possibility of requesting unemployment benefits for the employees.