NOTE: Because the COVID-19 situation is dynamic, with new governmental measures each day, employers should consult with counsel for the latest developments and updated guidance on this topic.

The Dutch government provided an update on the temporary Emergency Fund Bridging Employment (“NOW”) program. The framework for that measure was already announced (see our previous article), but there were still many questions.

In short, the NOW measure provides that companies that suffer at least a 20% loss of revenue during three (3) months will receive a maximum compensation of 90% of their wage costs from March 1, 2020 in proportion to the fall in revenue. So if the drop in revenue is less than 90%, the wage compensation will be proportionately lower.

Applications can be filed beginning April 6, 2020

The measure will be executed by the Employee Insurance Agency, the UWV. The UWV application desk is expected to open on Monday, April 6. On Friday, April 3, the Cabinet will announce whether NOW can be implemented as from April 6. The application period runs until May 31, 2020.

Compensation period and decrease in turnover

The compensation will in any case take place for a maximum period of three (3) months from March to May 2020. The turnover decrease of at least 20% must occur over a three-month period, the start date of which will be the first day of March, April or May 2020. Before June 1, 2020, the government will decide whether a additional (subsequent) compensation period of three (3) months will be applied. In the event of an extension, further conditions can be added to the scheme.

The compensation is related to the loss of turnover of the employer. Companies that meet the conditions for the NOW receive an advance payment of 80% of the salary compensation. This advance will be paid in three (3) parts. The first part can be expected within two (2) to four (4) weeks.

Employer obligations to qualify

There are two conditions for employers to qualify for NOW compensation:

1. A duty to keep wage costs the same, as much as possible; and

2. No application for dismissal for financial economic reasons.

The aforementioned duty means that employers will continue to pay their employees their regular salaries. If an employer’s wage costs decrease during the compensation period, the NOW wage compensation also decreases.

Employers may not submit a dismissal application to the UWV for financial economic reasons for the period from March 18 to May 31, 2020. Any applications already submitted on or after March 18 must be withdrawn. Applications submitted in the period from March 1 to March 17, 2020 will remain unaffected.

If the employer submits a dismissal application or does not withdraw an submitted application (in time), the UWV will make a correction: when determining the pay compensation, the UWV will determine the wages of the employees for whom dismissal has been applied for and increase this amount by 50%. The UWV will then deduct this wage, including the 50% surcharge, from the total wage costs on which the final amount of the NOW wage compensation is based.

To be clear, dismissal during this period for other reasons, such as lack of performance or immediate dismissal, of course, remains possible.

Amount of compensation

The amount of the compensation is the result of the following formula: A x B x 3 x 1.3 x 0.9.

In that formula, “A” represents the percentage of the drop in revenue expected by the employer. “B” is the employer’s wage cost based on the total wages of employees for whom the employer has paid wages, provided that the wages to be taken into account per employee do not exceed € 9,538, because the wages are capped at that figure, which is two (2) times the SV maximum daily wage. Salary above this limit is not compensated.

The basis for the wage compensation is the so-called social insurance wage. The UWV pulls employer information from the payroll tax return submitted to the Tax Authorities. For all companies, the UWV imposes a 30% surcharge on top for employer costs (such as employer contributions, holiday allowance and pension).

The UWV compares the wage costs from the compensation period with the wage costs from January 2020, as known to the Tax Authorities. If this amount is not known, the UWV will take the November 2019 wage costs as a starting point. The January 2020 wage return will be fixed on March 15, 2020. Changes made after March 15, 2020 will not be taken into account. With this limitation, the government aims to prevent abuse.

Who is covered?

The cabinet has opted for a "catch-all" approach. All persons for whom the employer submits a payroll tax and is insured under the Unemployment Insurance Act (WW), the Sickness Benefits Act (ZW) or the Work and Income (Capacity for Work) Act (WIA) count for the wage subsidy under the NOW.

The NOW makes no distinction according to contract form;: it includes flex workers such as on-call and temporary workers. Naturally, the compensation for this group is also subject to the condition that they are not dismissed during the compensation period.

The NOW also explicitly applies to employees for whom the employer has no obligation to continue to pay wages, e.g., employees with a zero-hour contract. In addition, the NOW applies, with the same conditions, to payroll and staffing agency employers as to direct employers. They, too, can receive NOW compensation for the wage costs of their employees.

Groups / personnel companies

If the employer's company consists of several legal entities that together form a group of companies, the UWV will use the decrease in revenue throughout the group for the NOW. In this way, companies that work with a so-called personnel company, a company that is formally the employer of the group employees and usually makes little or no revenue, can also make use of the NOW.

The application

In addition to providing information such as company name and payroll tax number, employers must complete the following steps to apply for NOW benefits:

• The employer applies for compensation for its wage costs in March, April and May 2020 in connection with a revenue loss of more than 20%;
• If the employer expects the effect of the current situation to become apparent only after a delay in the revenue figures, it should indicate that it wants the measurement period for the revenue comparison to start one or two months later. Nonetheless, the wage costs for consideration remain the wage costs for March, April and May 2020;
• The employer records the expected revenue loss in the three (3) months of the chosen measurement period and compares it with the total revenue turnover in 2019. It divides this figure by four (4), so that both figures refer to revenue over a three-month (quarterly) period;
• The employer then calculates the percentage loss of revenue and fills it in on the application form;
• Finally, the application form contains space for a further explanation for special situations. Examples for special situations include group situations and companies that only existed for part of 2019.

If an employer has more than one payroll tax number, it must submit several applications. Employers should be aware that for every application, they must fill in the loss of revenue for the entire group, thereby maintaining the same measurement period and the same loss of revenue for each application.

Final definitive assessment

Within 24 weeks after the end of the period for which the NOW has been granted, the employer must request a definitive determination of the pay compensation. In principle, it will have to submit an auditor's report. The UWV will then make a final statement within 22 weeks. Any NOW advance that is too high or too low will be settled with the employer.