- 25 Jun 2020
- Jasper Pot
In response to the economic impact of the coronavirus in the Netherlands, the Dutch legislator has introduced the Temporary emergency scheme for job retention (“NOW 1.0”). This scheme provided compensation for the labour costs of employers who expected a loss of turnover of at least 20% over a consecutive three-month period. The NOW 1.0 period ended on 31 May 2020. A detailed description of NOW 1.0 can be found here.
On 20 May last, the government announced that the NOW scheme was to be extended under the name “NOW 2.0”. We have already informed you of this in our previous article, found here. On 28 May, the government announced a number of additional changes for NOW 2.0, an overview of which you will find in this article. The government published the final text of NOW 2.0 on 22 June. This article provides an overview of NOW 2.0 provisions, focusing in particular on the differences between NOW 1.0 and NOW 2.0.
NOW 2.0 broadly shares the same basic principles as NOW 1.0. Employers may be eligible for a compensation of up to 90% of their total wages and salaries over the period from 1 June to 30 September 2020. Under NOW 1.0, the compensation period was three months. The cabinet has extended this period to four months under NOW 2.0. It is not required that NOW 2.0 applicants have also submitted an application for NOW 1.0. NOW 2.0 is open to any employer who meets the relevant criteria. Employers can apply for NOW 2.0 from July 6, 2020.
Loss of turnover
Under NOW 2.0, in order to obtain compensation, the company must experience a loss of turnover of at least 20% over a period of four consecutive months during the period from June 1, 2020 to November 30, 2020. The employer may opt to have this period of four consecutive months commence either on June 1, July 1 or August 1. However, if the employer has made use of NOW 1.0, the period of four consecutive months must directly follow the period of three consecutive months that the company has chosen under NOW 1.0 for the calculation of the loss of turnover. For example, if NOW 1.0 assumes a loss of turnover calculated for the months of May, June and July, the period for which the loss of turnover under NOW 2.0 must be calculated is automatically stipulated as August, September, October and November.
The turnover in the chosen period of four consecutive months is compared with the reference turnover from 2019. Where under NOW 1.0 the turnover for the whole of 2019 was divided by four, resulting in an average turnover over three months, NOW 2.0 will imply that the turnover for the whole of 2019 is divided by three, resulting in an average turnover over four months. This allows for a representative comparison by comparing turnover over two sets of four-month periods.
If there has been a transfer of undertaking in the period from 1 January 2019 to 1 February 2020, in which the employer is the acquiring party, the employer can choose to shift the period for the calculation of the loss of turnover to the period from the time of acquisition until February 29, 2020, converted to a period of four months.
If the employer has divested part of the company in the period from 1 January 2019 to 1 February 2020, under NOW 2.0, in contrast to NOW 1.0, the reference turnover is calculated over the period from the time of the divestment until February 29, 2020. This also applies to the situation in which the employer is part of a group and one of the group companies has divested a business unit. In that case, the reference turnover of the group is also calculated over the period from the moment of divestment until February 29, 2020. This prevents a distorted image, that might result in a higher compensation. As a result of the divestment of the business, turnover will decrease anyway. This method is more effective to determine whether the drop in turnover is actually a direct result of the corona crisis.
Amount of compensation
NOW 2.0 allows for an employer to receive a maximum of 90% of the total wages bill for the month of March 2020 multiplied by four. In this respect, NOW 2.0 deviates from NOW 1.0 that stipulated compensation based on the wages bill of January 2020. The percentage of 90% of the total wages bill is a maximum percentage, which will be paid if the turnover falls by 100%. If the loss of turnover is lower, the compensation will be proportionately lower as well.
The compensation is capped with regard to the wages for individual employees. This maximum is twice the maximum daily wages as used in social insurance laws. This amounts to a maximum amount of € 9,538 gross per month. If an employee's wages are higher than that, there will be no compensation for the excess amount.
Contrary to NOW 1.0, NOW 2.0 has no exception to the reference month of March 2020 for the height of the wage bill. Under NOW 1.0, employers whose wages in the months of March through May exceeded three times the January wages bill may choose to use the average wage bill for those three months to calculate the amount of the compensation. The reason for this is that some employers depend on seasonal work and for that reason had no or hardly any employees in January. The January wage bill was nil in that case, while employees may have been hired in March, April and/or May.
NOW 2.0 does not allow for the option to deviate from the March reference wage bill. The government assumes that all employers have had ample opportunity to take the corona crisis into account and that the wages in June, July, August and September will not be much higher than the wages in March.
Application and determination
Employers can apply for NOW 2.0 as of July 6, 2020. After the application, the employer will receive an advance of 80% of the compensation amount. This advance is paid in two instalments, as opposed to three instalments under NOW 1.0. At the conclusion of the compensation period, the employer must ask for a compensation determination. This is possible from 15 November 2020. The employer has 24 weeks from 15 November to apply for a determination of the compensation.
Contrary to what was previously announced, employers do not have to apply for the determination of NOW 1.0 and NOW 2.0 simultaneously. Employers who use both NOW 1.0 and NOW 2.0 can therefore choose to request determination of NOW 1.0 from 7 October 2020. However, employers may opt to request a final assessment of NOW 1.0 and NOW 2.0 at the same time as well. In that case, the deadline for determination remains 24 weeks after November 15, 2020.
Employers who receive a compensation in the amount of at least € 125,000 or who have received an advance of at least € 100,000 must submit an auditor's report by an accountant when applying for the compensation determination. In these cases, the employer is granted a longer period to request the determination, 38 weeks instead of 24 weeks.
Obligations for the employer
NOW 2.0 sees a continuation of the obligations that were already applicable under NOW 1.0. A summary of the obligations under NOW 1.0 can be found here. Some obligations have been adjusted in NOW 2.0 and a number of obligations have been added.
1. Fine for business economic dismissals
As was the case under NOW 1.0, NOW 2.0 prohibits dismissals for a business-economic reason. The sanction for submitting a dismissal application to the UWV under NOW 1.0 is to have the total amount of compensation reduced by 150% of the wages of the employee(s) for whom the employer has filed a request for dismissal.
This sanction is adjusted under NOW 2.0 in the sense that the compensation will be reduced by 100% of the wages of the employee(s) for whom the employer has filed a request for dismissal, instead of 150% under NOW 1.0. This sanction is imposed on employers who submit a dismissal application to the UWV (and do not withdraw it in time) in the period from 1 June to 3 September 2020. However, the sanction does not amount to 100% of the wages over the entire compensation period but is limited to 100% of the salary over a period of three months.
2. Fine for collective dismissal without union approval
In addition to the fine for dismissals for business-economic reasons referred to under 1 above, NOW 2.0 introduces a second fine. This fine will apply to employers who, in the period from May 30 to September 30, file a report under the Collective Redundancy Report Act (WMCO) and submit a dismissal application to the UWV for at least 20 employees. The height of the fine is 5% of the total amount of compensation received.
The fine can be avoided if an agreement is reached with the relevant unions. If there are no unions involved, the employer must reach an agreement with the employee representation. This includes the works council (WC), employee representative body (PVT) or the staff meeting. As a part of this overall agreement, there must be consensus on the number of jobs that are made redundant.
In case the employer cannot come to an agreement with the union(s), the employer and the union(s) need to submit an application for mediation to (a yet to be established committee of) the Labour Foundation. In default of an agreement or a mediation request, the fine of 5% of the total compensation is imposed.
Please note: the aforementioned obligation to come to an agreement with the unions in order to avoid the 5% dismissal penalty does not alter the obligation included in some collective agreements, in which companies are obliged to consult with the unions in case of each dismissal (of whatever size).
3. Premium for employers’ contributions
Under NOW 1.0, the wage bill for the month of January 2020 was used as the basis for the calculation of the compensation amount. This amount was then increased by a flat rate surcharge of 30%. This surcharge serves to compensate employers for the additional costs and costs that employers have to deal with, such as employer contributions, employee contributions to pension and the accrual of vacation days. Under 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 these fixed costs, the flat rate surcharge is therefore increased.
4. Payment of dividends and bonuses, and share buybacks prohibited
NOW 2.0 prohibits the distribution of dividends and bonuses and the purchase of own shares. This ban applies for the whole of 2020 and continues until the shareholders meeting in which the annual accounts are adopted in 2021. For companies and institutions that do not have shareholders, such as cooperatives, this applies up to the meeting in which the annual accounts are adopted in 2021. However, the prohibition only applies to bonus payments for the year 2020. Bonus payments for the year 2019 that were paid out in the year 2020 therefore do not fall within the scope of this prohibition.
The prohibition does not apply to every employer who receives compensation under NOW 2.0. The prohibition only applies to companies that receive a compensation amount for which an auditor's report is required. As explained above, an auditor's report is required for employers who receive a compensation amount of at least € 125,000 or who have received an advance of at least € 100,000.
In addition, the ban on bonuses only applies to bonuses paid to the board and management of the company. Bonuses for all other personnel working in the company are allowed. The cabinet has explained that the term management and board must be interpreted in the broadest sense. The registration in the Chamber of Commerce is not decisive here, or even whether the persons involved are authorized to represent the company or take decisions. Board members, management or members of management who determine the policy belong to the administrative, management or supervisory board and therefore fall under this provision. The internal name given to these positions is irrelevant. Even if an employee has a temporary seat on the administrative board, management, or supervisory board, no bonus may be paid to that employee.
Some companies have a split financial year. Such companies may possibly have already held a shareholders meeting for 2020 and decided on distribution of dividends. Stipulations with regard to those companies are that the prohibition on paying out dividends applies to the financial year in which the months of June through September fall financially. If these months fall within two separate financial years, e.g. because the financial year runs from August up until July, the prohibition applies to both financial years.
5. “NL leert door”: The Netherlands keeps on learning
The government has launched an initiative called “NL leert door” (The Netherlands keeps on learning). This initiative aims to support those individuals who have lost or run the risk of losing their jobs as a result of the crisis. It consists of development advice and online training. The government intends to launch this initiative by mid-July, and it will run until the end of the year.
Under NOW 2.0, employers who have been granted compensation are obliged to encourage its employees to request development advice or to take online training in order to be able to keep their jobs.