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Temporary Emergency Measures for Work Retention (NOW): Your Questions and Our Answers | 8 April 2020

On 17 March 2020, the Cabinet introduced the temporary Emergency Measure on Work Retention (NOW) to replace the regulation on short-time working. This article is an update of earlier articles we published through our Corona desk.

The NOW provides a substantial 90% payroll allowance if there is a drop in turnover of more than 20%. The scheme is valid for a period of three months from 1 March 2020 and may be extended for another three months.

On 27 March 2020, Minister Koolmees announced the details of the scheme. After another week of extensive testing of the systems, it has been possible to apply for the allowance at the UWV since 6 April 2020. On the first day, 35,000 entrepreneurs already applied.

In the following, we discuss the various aspects of the scheme in more detail.

1. The application

The NOW application takes place in two steps: first you apply for the grant - no later than 31 May 2020 - and receive an advance of 80% from the UWV. Then you apply for the final determination of the grant within 22 weeks after the end of the three-month period you selected (see below). You must then submit an accountant's declaration. On the basis of this, the UWV determines what the actual decline in turnover was.

For the application see: now.uwv.nl

Although the official decision period is 13 weeks, the UWV has indicated that in practice they are able to make a decision within 2-4 weeks. It is therefore the intention that you get clarity quickly.

2. The regulation on short-time working has been withdrawn. What happens to my application?

It is no longer possible to apply for a reduction of working hours (wtv). If your employer has already been granted wtv, this permit remains in force. If you want an extension after it expires, you must make use of the new temporary Emergency Measures for Work Retention (NOW).

If you have applied for wtv via the appropriate website but have not received an answer, then wait for a message from the UWV. Your application for the withdrawn wtv is regarded as an application for NOW. However, additional information will be requested so that the application can be assessed in accordance with the NOW requirements.

The NOW is a different scheme from the Wtv. There is no link with a concrete reduction in workable hours and the Unemployment Insurance Act (WW). The application process is simpler, employees are paid their wages (in full) and do not use up WW entitlements during the NOW period.

3. Provision and conditions

The scheme provides a contribution towards the wage costs of permanent and flexible workers in the event of an acute fall in turnover of at least 20% over a three-month period. The condition is that these workers remain in employment for the period for which the NOW is applied. The intention is that the employer pays 100% of the wages to the workers.

The amount of the wage costs allowance depends on the drop in turnover and amounts to a maximum of 90% of the wage bill. The allowance is calculated proportionally. For example:
When turnover falls away at 100%, the concession is 90% of the wage bill; at 50% it is 45% of the wage bill and at 25% it is 22.5%.

Turnover loss

The measurement period for the expected loss of turnover of at least 20% is a continuous period of three calendar months in the period from 1 March to 31 July 2020.

It concerns the decrease in turnover in the periods 1 March to 31 May 2020 or 1 April to 30 June 2020 or 1 May to 31 July 2020. You can therefore choose the period for your application in which you expect to lose the most turnover.

The expected loss of turnover in the chosen period of three months between 1 March and 31 July 2020 is set off against 25% of the turnover for the year 2019 (turnover January to December 2019 divided by four). This is the so-called reference turnover.

For companies without turnover in 2019 (start-ups), the turnover from the start date in 2019 until February 2020, converted to three months, is considered.

You do not have to demonstrate the reason for the decline, but if the requirement of at least 20% loss of turnover is not made plausible, this will (in any case) lead to rejection of the application NOW (Article 5(a) NOW).

Wage

The subsidy is based on the wage bill per LH number for January 2020.

This is the SV wage from present employment of the own employees (and therefore not of temporary employees), whereby a maximum applies per employee per month of € 9,538 (twice the maximum premium wage). If you file your wage tax return with the Tax and Customs Administration per 4 weeks, the wage for 4 weeks is converted into a monthly wage by increasing it by 8.33%.

You may add 30% to the SV wage. This flat-rate supplement compensates for pension contributions, insurance premiums and the accrual of holiday pay.

Company

If your enterprise consists of one legal entity (for example, a BV or NV) or if you have a sole proprietorship, with one payroll tax number, you determine the turnover decrease for this enterprise and submit one application.

If you are using multiple payroll tax numbers, you should apply for each payroll tax number based on the decrease in turnover you expect for the entire company.

Within a so-called group of companies, a concern, the turnover decrease of the entire group is the basis for the subsidy. An application must be made for each payroll tax number based on the same drop in turnover.

In case of an application for groups with both Dutch and foreign subsidiaries, only the turnover of legal entities in the group with employees with Dutch salaries is counted.

Calculation of advance payment and allocation

When applying for and granting the advance, the calculation is as follows:

  • % expected decrease in turnover × wage bill January 2020 × 3 × 1.3 × 0.9 (but 80% will be paid as an advance)

The UWV uses the following calculation for the (definitive) allocation (the post calculation):

  • % actual turnover decrease × wage bill (period chosen 3 months 2020) × 1,3 × 0,9

If the wage bill and/or the decrease in turnover prove to be lower than stated on the application, the subsidy will be lower and the UWV will reclaim the (partially) undue advance payment.

If the wage and salary bill and/or the decrease in turnover in the subsequent calculation proves to be higher than stated in the application, this will not lead to an increase (subsequent payment) of the subsidy.

4. Are the wage costs of flexible workers for NOW also included in the wage bill?

In the first six months, the employer may exclude the right of on-call workers to continued payment of wages, provided that this is laid down in the employment contract or collective agreement via a so-called wage exclusion clause. In that case, 'no work, no pay' applies.

However, the NOW also provides an allowance for the wage costs of those who keep their employees in flexible employment and pay them more than the law requires. In this way the government hopes to encourage the payment of wages even where there is no legal obligation to continue paying wages. The wages of employees with flexible working hours are therefore included in the wage sum used to determine the NOW allowance.

The tricky thing here is that with on-call contracts, the wage bill is often not clear beforehand because it is not certain how many hours the on-call worker will be employed.

In addition, the following may also apply:

  • If no wage exclusion clause has been included or the clause ceases to apply (generally after six months), the on-call worker may rely on the legal presumption of Section 7:610b of the BW. The scope of work is then presumed to be equal to the average scope of work in the three preceding months. If the employer does not succeed in refuting this legal presumption, the on-call worker may claim continued payment of the average salary over the three months.
  • After 12 months, the on-call worker is entitled to fixed hours equal to the average number of hours worked in the previous 12 months.

However, the NOW does not use the legal presumption or the 12-month average for the wage bill for flexible workers, but simply the average wage in January 2020 (or, if data are not available, the average wage in November 2019).

You should therefore take into account that if you end up paying less wages to these flexible employees over the months March to May 2020, the subsidy will be determined lower in the subsequent calculation. You will then have to deal with a recovery.

If you decide to include the wages of flexible workers in the NOW scheme and you continue to pay them during the NOW period on the basis of the average of January 2020, even if a period of wage exclusion still applies, you may be taking a risk. This risk consists of the fact that afterwards - after the period for which you receive a NOW subsidy - employees may invoke the legal presumption. The question is whether you could refute that legal presumption by stating that you only continued to pay the wages 'as a courtesy' because 'this was in accordance with the government's wishes'.

Since this is a new regulation, we cannot estimate how subdistrict courts will deal with it in the future. You can try to limit the risk by confirming in writing to the employees that their wages will continue to be paid 'as a courtesy and therefore entirely without obligation', exclusively on the grounds of and for the period of the NOW.

For a detailed discussion on, among other things, on-call workers, see our article on flexible labour.

5. What are the obligations of employers under the NOW?

  • You are obliged to keep the wage bill "as similar as possible";
  • During the three-month period in which you make use of the NOW, there is a ban on applying for dismissal permits on the grounds of business economic reasons under 7:669(3)(a) of the Civil Code;
  • You may only use the subsidy to pay the wage costs;
  • You must inform the Works Council, Staff Representation or, in their absence, the employees, about the grant;
  • You must keep verifiable records, cooperate in auditing the records and have various reporting obligations, such as reporting without delay when it is clear that you no longer meet the conditions for subsidy.
  • You must provide an auditor's report afterwards.

6. May the employment contract be terminated under the NOW?

Employers are therefore expected, during the NOW subsidy period, not to apply to the UWV for dismissal for economic reasons.

If you do, it will have consequences for the amount of the subsidy, whether or not the UWV issues a dismissal permit. When determining the subsidy, the wages of the dismissed employees plus a 50% increase are deducted from the total wage bill, which forms the basis for the subsidy.

This penalty regulation does not apply to dismissal requests for economic reasons made in the period from 1 March to 17 March 2020. Although the NOW subsidy also covers this period, employers were not yet aware that the dismissal ban would apply.

The prohibition of dismissal under the NOW does not prejudice the termination of the employment contract for other reasons, such as dysfunction or culpable behaviour, provided that the requirements are met.

This also applies to the termination of fixed-term contracts, provided that the employment contract includes an interim termination clause. Of course, it is also permitted to not extend fixed-term contracts or to terminate contracts during the probationary period.

For dismissals other than through the UWV and/or on other grounds than economic grounds, the penalty scheme does not apply. Please note that the wages of the dismissed employee(s) do not count towards the total wage bill in the subsequent calculation. As a result, the subsidy may be lower.

See also our article on termination of an employment contract

7. Is recourse to NOW also possible if my farm is closed down voluntarily?

Although there is no complete lockdown in the Netherlands and, for example, 'non-essential' shops may remain open, an appeal to the NOW is also possible in the case of a voluntary closure.

The NOW does not seem to us to be intended for employers who can continue to operate even with the 'social distancing' measures and would still be able to generate sufficient turnover without closure. The condition is that there is a loss of turnover due to extraordinary circumstances that are not part of the normal business risk. If you cannot properly substantiate why you had to close down due to extraordinary circumstances, you may face a recovery afterwards.

8. Is recourse to NOW also possible in case of loss of business due to reasons other than the corona crisis?

The scheme provides for an indemnity towards labour costs in case of an acute drop in turnover of at least 20% due to a reduction in business caused by extraordinary circumstances which cannot reasonably be considered as belonging to the normal entrepreneurial risk. However, the reason for the expected decrease in turnover does not have to be explained.

A quick and generic regulation was chosen instead of a specific and watertight one.

The scheme does have anti-abuse provisions, such as the obligation to use the subsidy in full to pay the wage costs. In the event of evident abuse, the UWV may suspend the advance payment or refuse the subsidy afterwards. In the event of a reasonable suspicion of a criminal offence during or at the time the grant is determined, the UWV has the option of reporting the matter to the Public Prosecution Service (OM).

Finally

Do you have further or other questions? Please contact one of our labour lawyers.

Click here for more articles written about (the consequences of) the coronavirus.

 

 

 

 

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