Extension NOW-scheme: how does it work?

29 May 2020

Jasper Pot

The Temporary emergency scheme for job retention (NOW) provides a compensation for the wage costs of employers who expect a loss of turnover of at least 20% over a period of three consecutive months. Read here about the first instalment of the NOW (NOW 1.0). On 20 May last, the Minister of Social Affairs and Employment (the minister) sent two letters to parliament. In one letter to parliament, the minister announced several changes and additions to the NOW 1.0. The other letter to parliament announced that the NOW will be extended by an additional period of three months. The second instalment of the NOW (NOW 2.0) will immediately follow the NOW 1.0 and provides for the compensation period 1 June to 31 August 2020.

In this article we will discuss the NOW 2.0. Click here for the article discussing the changes to the NOW 1.0.

Basic principles

The NOW 2.0 broadly shares the same basic principles as the NOW 1.0. Employers may be eligible for compensation of up to 90% of their total payroll for the period June 1 through August 31, 2020. NOW 2.0 applicants are not required to have also applied under the NOW 1.0. The NOW 2.0 is open to any employer who meets the requirements of the scheme. The minister aims to open the second application period on 6 July 2020.

The NOW 2.0 also stipulates that, in order to receive compensation, the company needs to expect a drop in turnover of at least 20% over a period of three consecutive months. The employer may choose to have this period of three consecutive months start on June 1, July 1 or August 1. However, if the employer has applied for the NOW 1.0, the period of three consecutive months must immediately follow the three consecutive months that the company selected to calculate the loss of turnover under the NOW 1.0.

For example, if the calculation of loss of turnover under the NOW 1.0 was based on the three months’ period May, June and July, then the period for which the loss of turnover under the NOW 2.0 must be calculated will automatically be August, September and October.

Changes from NOW 1.0                 

In addition to these NOW 1.0 basic principles that are maintained in the NOW 2.0, a number of conditions have been changed and added in the NOW 2.0.

1. Penalty for dismissals on economic grounds

As is the case under the NOW 1.0, the NOW 2.0 prohibits economic dismissals. The penalty for submitting a dismissal application to the UWV under the NOW 1.0 is a compensation reduction of 150% of the wages of the employee(s) for whom a dismissal request is submitted.

The ban will continue to apply under the NOW 2.0. However, the penalty is adjusted in the sense that the compensation will be reduced by 100% of the wages, instead of 150%. This penalty will be imposed on employers who submit a dismissal application (and who do not timely retract) in the period from 1 June to 31 August 2020.

2. Surcharge to employer contributions

Under the NOW 1.0, the wage bill of January 2020 was used as the basis for calculating the amount of compensation. This amount was increased by a flat rate surcharge of 30%. This surcharge serves to compensate employers for the additional premiums and costs that employers have to deal with, such as employer contributions, employee contributions to pension and the accrual of vacation days. Under the NOW 2.0, this surcharge is increased from 30% to 40%. The reason for this is that, in addition to wage costs, many employers also have other fixed costs that they cannot continue to meet due to the corona crisis. In order to also compensate employers for those fixed costs, the flat-rate surcharge is increased.

3. Payment of dividends and bonuses, and purchase of own shares prohibited

The NOW 2.0 prohibits payment of dividends and/or bonuses and the (re)purchase of own shares. This prohibition applies for the whole of 2020 and continues until the shareholders' meeting in which the annual financial statements are approved in 2021. For companies and institutions that do not operate through a shareholders' meeting, such as cooperatives, this rule applies up to the meeting in which the annual accounts are approved in 2021.

However, the ban does not apply to every employer who receives compensation under the NOW 2.0. The ban only applies to companies that receive a compensation amount for which an auditor's report is required. See the article discussing the NOW 1.0 under 5 where the rules governing the requirement of an auditor report under NOW 1.0 is discussed.

The ban on bonuses applies only to bonuses paid to the board and management of the company. Payment of bonuses for all other personnel working in the company is allowed. The prohibition also does not apply to dividends, bonuses and shares for 2019, since the decisions about these were presumably taken before the onset of the COVID 19 crisis in the Netherlands.

4. “NL continues to be educated”

The government launches the initiative “NL continues to be educated”. This initiative aims to support people who are at risk of losing their work or have already lost their work as a result of the crisis. The initiative consists of development advice and online training. The government aims to launch the initiative in July 2020, which will run until the end of 2020.

Under the NOW 2.0, employers who make use of the scheme are required to make an effort to encourage their employees to request development advice or to receive training for job retention.