On March 31, 2020, the Dutch government published the Emergency Fund for Employment and Businesses. The measures are taken with the aim to protect jobs and incomes and to address the consequences of the COVID-19 outbreak on self-employed professionals, SME-entrepreneurs and large companies. The measures aim to ensure that companies can continue to pay their staff, bridge the gap for self-employed workers and assist companies in maintaining their cash position as much as possible through specific tax schemes, compensation and extra finance and credit proposals. We will focus on the employment measures.
Employment Emergency Fund (NOW)
The government introduced the ‘’Employment Emergency fund ’’ (Noodfonds Overbrugging Werkgelegenheid). This is a new regulation which will temporarily replace the decrease in work time regulation (Werktijdverkorting). The main elements are as follows.
As per 6 April 2020 employers can submit an application for a substantial contribution towards their wage costs and receive an advance subsidy from the Insurance Administration Agency (UWV). The amount of the wage costs subsidy depends on the drop in turnover and can at maximum cover 90 per cent of the wage bill.
- If 100 per cent of the turnover is lost, the compensation amounts to 90 per cent of the wage cost of an employer.
- If 50 per cent of the turnover is lost, the compensation amounts to 45 per cent of the wage cost of an employer.
- If 25 per cent of the turnover is lost, the compensation amounts to 22.5 per cent of the employer’s wage cost.
The UWV will pay an advance equal to 80 per cent of the subsidy requested. Aim is to pay the first part of the advance payment within 2 – 4 weeks. The actual decrease in turnover will be calculated afterwards and, based thereon, the final subsidy will be determined.
Most important requirements:
- The employer must commit not to apply for a dismissal permit for economic reasons during the period that the subsidy is paid. If the employer nevertheless applies for a dismissal permit, 150% of the wage sum of the concerning employees will be deducted from the total wage sum which will impact the final subsidy amount. Dismissal on other grounds is still possible.
- During the period the subsidy is granted the employer needs to keep the wage sum the same as much as possible.
- The subsidy must be used for the payment of wages.
- The employer needs to inform the Works Council/staff representation or employees about applying the NOW measure.
- The employer must ensure verifiable administration.
- The application is valid for a period of three months. The government can decide to extend with an additional three months (further conditions may be imposed on the extension).
- Applications for larger subsidies require an audit.
Loss of turnover
The employer qualifies for the subsidy if at least 20 percent loss of turnover is expected between 1 March 2020 – 31 May 2020, 1 April 2020 – 31 June 2020 or between 1 May 2020 – 31 July 2020. The expected turnover will be compared to the average quarterly turnover in 2019.
For companies that are part of a group, the turnover loss is examined at group level. Only if the group as a whole has more than 20% loss of turnover, companies can be entitled to the subsidy. Foreign legal entities should only be taken into account if their employees are covered by the Dutch employed persons’ insurance schemes (sociale verzekeringen).
To determine the wage bill, NOW ties in with the wages for the purposes of wage tax/national insurance contributions (SV-loon). A supplement of 30% is applied to cover additional employer costs such as pension contributions and holiday allowance. Further, the wage sum for which subsidy can be requested is limited to an amount of EUR 9,568 per employee per month. The part of the monthly reward that exceeds this amount is not taken into account when determining the wage bill.
A correction takes place when the subsidy is finally determined. At that time, the actual wage sum in the months of March, April and May 2020 is considered (also if a different three-month period has been selected in respect of the loss of turnover). If the wage sum is lower than three times the wage sum over January 2020, because (for example) employees have left the company or on-call workers have not been paid, the subsidy will be adjusted downwards. The aim is to encourage employers to retain as much employment as possible.
Calculation of the subsidy
When requesting the subsidy:
- % expected loss of turnover x wage sum of January 2020 x 3 x 1,3 x 0,9
- Advance payment is 80% of the above amount
For example: the employer wage sum in January of EUR 200.000. The subsidy for the three month period is expected to be:
- 10% turnover loss: subsidy = € 0
- 50% turnover loss: subsidy = 50% x € 200.000 x 3 x 1,3 x 0,9 = € 351.000
- 100% turnover loss: subsidy = 100% x € 200.000 x 3 x 1,3 x 0,9 = € 702.000
Determining the final subsidy:
- % actual drop in turnover x wage sum of 1 March 2020 – 31 May 2020 x 1,3 x 0,9
- Lower wage sum: subsidy can drop
- Higher wage sum: no subsidy increase
For example: the wage sum from 1 March 2020 until 31 May 2020 is EUR 600.000 x 1,3 = EUR 780.000.
The final subsidy would be in case of:
- 5% turnover loss: subsidy = € 0
- 60% turnover loss: subsidy = 60% x 90% x EUR 780.000 = € 421.200 (payment in advance was € 280.800)
- 90% turnover loss: subsidy = 90% x 90% x EUR 780.000 = € 631.800 (payment in advance was € 561.600)
Please note that the UWV will take NOW into account when determining whether requests for dismissal permits will be granted. This means that when applying for dismissal for economic reasons, the employer will have to substantiate that the dismissal cannot be prevented by appealing to the NOW. This is in line with the aim of the NOW that dismissal should be prevented as much as possible.
We are happy to assist you with questions relating to the NOW-measure or other issues you encounter due to the COVID-19 outbreak. Do not hesitate to contact one of our team members.
Please read more about the legal implications of the COVID-19 outbreak across various industries and sectors on our website.