On 31 March 2020, the Minister of Social Affairs (Wouter Koolmees) has published the NOW-regulation (in Dutch: Tijdelijke noodmaatregel overbrugging voor behoud van werkgelegendheid (NOW-regeling)). The reason for the NOW is the current outbreak of COVID-19 (the coronavirus) and the related government measures, which have a huge impact on the social life and the Dutch labor market. The main purpose of the NOW is to support employers to keep employment ongoing in times of severe revenue decrease. The NOW provides a contribution towards labor costs with a maximum of 90%, depending on the revenue decrease. The NOW replaces the WTV-regulation (in Dutch: reguliere Regeling Werktijdverkorting (WTV-regeling), which has been withdrawn on 17 March 2020.
Content and scope
The NOW-regulation supports employers who are confronted with a revenue decrease of at least 20% over an associated period of three months. The principle of the regulation is that the revenue decrease is the consequence of extraordinary circumstances that are beyond normal business risks, such as the coronavirus and the related government measures. By means of the NOW, the government is relying upon the employees to commit themselves to continue the employment in the Netherlands as much as possible.
The NOW initially provides a subsidy for the labor costs from March 2020 to May 2020. The Dutch government can decide tot extend this period by three months, if the situation so requires. Any extension will be decided upon no later than 1 June 2020.
The NOW allowance applies to the labor costs of employees who are compulsorily insured for the Dutch employee insurance schemes. The NOW is therefore applicable to both permanent and flexible workers, such as on-call workers and employees with a zero-hour contract. The NOW provides the same conditions for payroll and agency employers as to regular employers. The Dutch government calls on employers to take responsibility for their flex workers, by continuing to pay their wages as much as possible. The allowance does not apply to labor costs of uninsured or voluntarily insured DGA’s (in Dutch: directeur grootaandeelhouder).
The NOW also applies to starting entrepreneurs if there has been at least a month of revenue before 1 March 2020 and there have been wages. The NOW also applies for international employers, as long as the international employers have employees in the Netherlands who are compulsory covered for the Dutch employee insurance schemes.
Determination of the allowance
The NOW subsidy amounts to a maximum of 90% of the total wage sum (in Dutch: loonsom) for the period from March 2020 to May 2020. The total wage sum is based on the social insurance wages of the employment relationship. Additional expenses and costs, such as employer contributions (to pension) and holiday allowance, are also compensated. To speed up the processing of the applications, a standard surcharge of 30% for employers’ costs applies to every case. Hired employees (such as payroll and temporary workers) are not included in the total wages of the employer.
For the total wages a maximum amount of twice the maximum daily wages per month, per individual employee is taken into account. Wage as far as it exceeds the amount of EUR 9,538 per month ise therefore not eligible for subsidy. The total amount of the subsidy is determined on the basis of the percentage of revenue decrease, whereby the allowance is proportional to the percentage of revenue decrease. The following examples apply:
in the event of a revenue decrease of 100%, the allowance amounts to 90% of the total wages of an employer;
in the event of a revenue decrease of 50%, the allowance amounts to 45% of the total wages of an employer; and
in the event of a revenue decrease of 25%, the allowance amounts to 22,5% of the total wages of an employer.
Conditions application NOW
To qualify for an allowance, the employer has to be confronted with a revenue decrease of at least 20%. The revenue decrease must occur over a three-month period, starting from the first day of March, April or May 2020. If the employer expects the revenue decrease will be delayed, the employer can choose a later period, provided that the last measurement period can be chosen from 1 May to 31 July 2020. The revenue over the measurement period is compared with the revenue over 2019, divided by four (the so-called ‘reference period’). In light of overall efficiency, this ignores the possibility that the numbers for 2019 may not be representative (for example, seasonal influences are not taken into consideration). Employers must determine the percentage of expected revenue decrease themselves. In the situation the employer did not yet exist on 1 January 2019, a different provision applies.
With the definition of ‘revenue’, the NOW is consistent with the definition of revenue in Dutch accounting law. This definition is based on net revenue or in other words the income from the supply of goods and services from the business of the legal person, after deduction of discounts and taxes on revenue.
In the case of a group of legal entities, the revenue decrease applies at group level. The employer must submit the revenue of the group to determine whether the employer is eligible for the NOW. An application must be filled for each individual payroll tax number in the group. The same rules apply to a subsidiary. Foreign subsidiaries and companies that belong to the group are also taken into account for determining the revenue decrease, as long as they have wages in the Netherlands.
Application, advance and allocation of subsidy
An application based upon the NOW-regulation can be submitted to the UWV (in Dutch: Uitvoeringsinstituut Werknemersverzekeringen). Applications can be submitted as of 6 April 2020. The necessary application forms can be found on www.uwv.nl.
The following roadmap is applicable to a NOW application:
the employer submits an application to the UWV for subsidy for the total wage sum over March, April and May 2020 in connection with a revenue decrease (of at least 20%);
the employer compares the expected revenue over the chosen measurement period with the total revenue in 2019, divided by four (the ‘reference period’); and
the employer calculates the revenue decrease in percentages, based on the comparison of the reference period and the expected revenue over the measurement period. The employer fills in the expected percentage revenue decrease on the application form. If an employer has multiple payroll tax numbers, the employer will have to submit multiple individual applications.
The UWV will process the application and, after a positive decision on the application, will grant an 80% advance of the final subsidy, as calculated upon the information provided in the application form. The UWV will decide upon the application within 13 weeks. Payment of the advance will occur in three installments, provided that the aim is that payment of the first installment will take place within 2-4 weeks.
The employer must apply for a definitive determination of the subsidy within 24 weeks after the end of the measurement period. In principle an audit opinion is required. More information concerning the limit of subsidy amount below which an audit opinion is not required, will be announced at a later stage. The UWV will determine the final subsidy within 52 week of receipt of the application for a definitive determination. After settlement, either repayment or a subsequent payment will take place.
The NOW contains certain conditions and/or obligations for employers. First of all, the employer has an obligation of best efforts (in dutch: inspanningsverplichting) to maintain the total wages as much as possible and to continue to pay the employees. After all, a decrease in the total wages will have a negative impact on the amount of subsidy the employer is entitled to. The advance of 80% is based on the total wages over the tax return period of January 2020. If the total wages over the measurement period are lower, the subsidy will be reduced by 90% of the amount by which the total wages has decreased.
Secondly, the employer is required not to apply for redundancy on the basis of economic reasons for his employees, during the period for which he will receive subsidy. This is in line with the main purpose of the NOW, which is to maintain as much employment as possible. This obligation applies for the period from 18 March 2020 to 31 May 2020. A request for redundancy at the UWV can be withdrawn by the employer up to five working days after the submission. In case the employer nevertheless applies for redundancy with the UWV and this application has not (or not in time) been withdrawn, a correction (as a penalty) will be settled when the subsidy is determined. In such case ,an amount equal to the monthly wages of the employees for whom redundancy has been applied for (regardless of whether the application for redundancy has been granted) increased with 50% thereof and then multiplied with factors x3 x 1,3 x 0,9 will be deducted from the subsidy. Finally, the employer is obliged to use the subsidy in full for the payment of labor costs. The employer informs (if present) the works council or staff representatives about the application. In the absence of these bodies, the employer informs the employees.
Abuse and improper use
The Dutch government has appealed to the ‘good will’ of the employers not to abuse the NOW-regulation. A number of measures have been made to control the risk of abuse. For example, the employers are obliged to manage a verifiable administration, so it is possible to check afterwards whether the subsidy is justified. Upon request, the employer will provide access to his administration, up to five years after the subsidy has been determined. In addition, the employer will promptly inform the UWV if it appears that he no longer meets the requirements for the subsidy. The UWV retains the possibility to suspend the payment of the advance if there is a serious suspicion that the conditions have not been met and can fully or partially reclaim a subsidy that already has been granted.
The UWV has the option to lodge a complaint to the Public Prosecution Service (in Dutch: Openbaar Ministerie (OM)) if there is a reasonably suspicion of a criminal offense. The Public Prosecution Service can institute a criminal investigation in case of abuse and proceed to prosecution. The Inspectorate SZW (in Dutch: Inspectie SZW) is also authorized (under the authority of the Public Prosecution Service) to institute an investigation, based on the information from the UWV. The UWV will conduct random checks by means of data analysis, both during the period of application and after the receipt of the subsidy.
Request WTV-regulation already submitted
In case a permit has already been submitted and obtained on the basis of the WTV-regulation, the WTV-regulation will continue to apply. However, an extension can no longer be requested. It is possible though for the employers to subsequently submit an application on the basis of the NOW-regulation.
If an application has been rejected on the basis of the WTV-regulation, a new application can be submitted on the basis of the NOW-regulation. In addition, pending applications based on the WTV-regulation will be considered as applications based on the NOW-regulation. In that case, employers will be notified if additional information is required.
Dismissal still possible?
The answer to this question is ‘Yes’. The moment the outline of the NOW-regulation was announced, it was concluded that dismissal of employees during NOW would not be possible. The development shows that this is incorrect. However, a dismissal does have consequences for the amount of the allowance (as described above). If there are reasons to reorganize (for example, if a structural reduction in work is expected) or if there are other reasons for dismissal, an employer does not have to wait. This depends on the financial picture.