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Employment, employee participation & pensions

Update: Further information on the NOW-regulation, to protect employers and employees, has been published.

1 April 2020 - 3 minutes reading time

The Dutch government has taken further emergency measures in order to keep the economy going and to secure jobs. One measure is that employers receive a compensation for labour costs due to loss of turnover. More information on this ‘Temporary Emergency Measure to Secure Business-regulation’ (NOW in Dutch) has been published. The NOW-regulation is scheduled to take effect on 6 April 2020, but may be postponed to 14 April 2020. Employers should submit the application before 31 May 2020.

Who is entitled to financial compensation from the Dutch government?

All entrepreneurs who expect a turnover loss of a minimum of 20% over a 3 month period, will receive a compensation for the costs with regard to continued salary payment to their employees. This applies to fixed-term employment contracts, permanent contracts and on-call contracts (such as zero-hours contracts and temporary workers).

There are three possible ‘measurement periods’ to determine the turnover loss of a minimum of 20%:

  • 1 March – 31 May 31 2020, or
  • 1 April – 30 June 30 2020, or
  • 1 May – 31 July 2020.

The employer can decide for which 3 month period they want the projected turnover loss to be calculated. The compensation is provided with regard to the wage bill of the employer for the period March to May 2020, regardless of the turnover period chosen by the employer.

Conditions for financial compensation

The company shall be entitled to financial compensation if he continues to pay the (full) wages of the employees and if it refrains from filing a request for termination because of redundancy for business reasons with UWV from 18 March 2020 to 31 May 2020.

Penalty

If the employer still makes any employee redundant for business reasons during the NOW-regulation period (18 March-31 May 2020), a ‘penalty’ will be charged by UWV. The compensation-reduction is in that case 50% higher than if the salary of the same employee had not been paid.

In addition, the employer should make it plausible that and explain why dismissal due to business reasons cannot be prevented by appealing to the NOW compensation. These measures are in line with the objective of the NOW to prevent dismissal as much as possible.

The amount of the compensation

The compensation amount is directly linked to the expected loss of turnover. In the case of an expected 100% turnover loss, the compensation will be limited to a maximum of 90% of the labour costs.

  • 100% loss of turnover: compensation of 90% of the ‘labour costs’:
  • 50% loss of turnover: compensation of 45% of the ‘labour costs’;
  • 25% loss of turnover: compensation of 22,5% of the ‘labour costs’.

How to determine the turnover loss

In order to determine the turnover loss, the employer should divide the total turnover of 2019 by four (1/4). The result of this calculation should be compared with the expected turnover in the chosen 3 month measurement period.

If an employer is part of a group, the turnover of (every member of) the group or the associated legal entities must be reported together to determine whether a compensation can be claimed. Every employer within a group therefore has to use the same three-month period and compares this with the same turnover. However, every legal entity has to request for compensation separately.

Labour costs

The labour costs consist of the social insurance wages plus – a flat rate of 30% for each company – because of employer charges such as holiday pay, pension and employer’s contributions. The labour costs compensation is not unlimited. Wages are capped per employee at a maximum of in total € 9.538 gross. The part of the wages above this amount will not be compensated.

Duration of the NOW-regulation

The compensation will initially be granted for 3 months, retroactively as per 1 March 2020 to 31 May 2020. The compensation can possibly be extended once for an additional 3 months.

How does the NOW-regulation work?

  1. The application must be submitted to UWV (Employee Insurance Agency Netherlands);
  2. UWV will provide an initial advance of 80% of the expected compensation. The UWV aims to pay this initial advance within 3-4 week after receipt of a complete application;
  3. The employers continues to pay the (full) wages of the employees (accrued unemployment rights will not be effected by this new regulation);
  4. The employer should apply for the ‘determination of the compensation’ within 24 weeks after the end of the permit period. In principle, an auditor’s report is required for this application, but this will probably only apply to ‘big companies’;
  5. The (actual) decrease in turnover will be determined within 52 weeks of receipt of the application and may lead to an adjustment to the compensation of the labour costs.

Employee participation

The employer is obliged to inform the works council or employee representation, or in the absence thereof, the employees with regard to the compensation.

What if the company has already applied for the short-time work reduction-permit?

As mentioned, the short-time work reduction-regulation (WVT) is inactivated and will be replaced by the NOW-regulation. If the employer has already submitted an application for a short-time work reduction-permit, but not yet received the permit, the application will apply to the new regulation. If an employer has already applied for the short-time work reduction-permit and received the permit, this will remain in force. Any extension in this case will be applied according to the new rules.

Renate Vink-Dijkstra and Guus Wife

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