The temporary subsidy scheme for compensation for labour costs in connection with the coronavirus (NOW) was published on Tuesday 31 March 2020. In this Q&A, we answer most of the questions that currently exist among employers.If you would like to know more about your obligations as an employer during this corona crisis, please consult our website with updates and other Q&As.
How does the subsidy come about?
The amount of subsidy will ultimately be based on the wage bill for the period from 1 March 2020 to 31 May 2020. The subsidy will amount to a maximum of 90% of this wage bill, with a drop in turnover of 100%. If the drop in turnover is less, the subsidy will be proportionately lower. For example, if the turnover drops with 50%, the subsidy amounts to 45% (50% of 90%) of the wage bill, and if the turnover drops with 20%, the subsidy amounts to 18% (20% of 90%).
Due to the emergency situation, an advance on the subsidy of 80% is granted, based on the calculation of three times the wage bill of January 2020. The subsidy is definitively determined afterwards, in which case the actual wage bill for the period from March 2020 up to and including May 2020 is taken into account. If the wage bill appears to have decreased in comparison to January 2020, the subsidy will be adjusted downwards. If the wage bill appears to have increased in comparison to January 2020, the subsidy will not be adjusted upwards. The actual percentage of turnover decrease is also taken into account in the final determination of the subsidy.
For what period can the subsidy be applied for?
The subsidy provision primarily concerns labour costs over the period March through May 2020. However, the government has explicitly kept open the possibility of extending the scheme by 3 months. It will be decided before 1 June 2020, if an extension is granted. It is not possible to apply for the subsidy for a shorter period than 3 months.
What does the wage bill entail?
The wage bill is based on social insurance wages from current employment. With a few exceptions, this wage is equal to the wages for payroll taxes. This includes, for example, bonuses, but not a paid termination payment or benefits that the employer has received through the UWV. A maximum of EUR 9,538 (twice the maximum daily wage) per employee per month is used for the wage bill.
Additional costs and expenses such as employer contributions and employee contributions to pension and the accrual of holiday allowance are also included. To speed up the application procedure, a surcharge on the wage bill for employers' costs of 30% was chosen for all cases.
The advance is calculated based on the wage bill for January 2020. If no data is available over January 2020, the wage bill for November 2019 will be considered. If data over both periods is not available, the employer cannot apply for subsidy.
What if the employer does not file a payroll tax return per month, but per 4 weeks?
In that case, the wages over the 4-week period will be converted to the wages in 1 month, by increasing it by 8.33%. The four-week periods that have the most overlap with those months, namely the period from February 24 to May 17, 2020, are taken as an approximation of the wage bill in March to May 2020
What happens if I ultimately have more or less wages costs in the period March to May 2020 than in January 2020
As indicated above, if the wage bill turns out to be lower, the subsidy will be adjusted downwards (90% of the amount by which the wage bill has dropped). If the wage bill appears to have increased, the subsidy will not be adjusted upwards. This has to do with the fact that employers are expected to make an effort to keep the wage bill as equal as possible and to continue to pay employees (including those with a flexible contract). The scheme has therefore been introduced in such a way that a decrease in the wage bill (fewer (paid) employees or lower wage bill) will have consequences for the amount of the final subsidy that the employer can claim.
Does the employer have to submit a separate application for each entity within the group?
Although the entire group is taken into consideration with regard to the drop in turnover (see below), the application for the NOW must be submitted per Dutch withholding tax number.
For which employees can the employer apply for the subsidy? What about employees who have been sent abroad?
If the employees that have been sent abroad are still covered by social insurance in the Netherlands, the wages of these employees will also be included in the wage bill.
Is the director and major shareholder (DGA) also covered?
DGAs are not or voluntarily insured are not covered by the scheme.
What about temporary employment and pay rolled employees?
If allowed under the agreed upon conditions, the hiring employer can stop hiring these workers. The subsidy can be applied for by the formal employer, not by the hirer. The same conditions apply to payroll and agency workers as to regular employers. The subsidy can be applied for for the wage costs associated with hiring (and continuing to pay) temporary workers and payroll employees.
Can the employees keep working?
Yes. This is different from the short-time working scheme. No restrictions apply to this under the NOW.
Does the employer have to continue to pay 100% of the wages?
The NOW assumes that all employees within the company, including, for example, on-call workers, will continue to receive 100% of their wages. Failure to do so could affect the final amount of the subsidy.
Can the employer still dismiss employees?
Employers are expected not to submit dismissal applications based on economic grounds over the period from 18 March to 31 May 2020. If dismissal is nevertheless applied for at the UWV, a correction will be made by means of a 'fine amount' when the subsidy is determined. The wages over January 2020 for employees for whom dismissal has been applied for will be increased by 50% and three times that amount will then be deducted from the total wage bill on which the ultimate amount of the subsidy is based. The reduction of compensation is 50% higher than if the same employee's wages had not been paid.
If the employer, despite the above stated, still would like to request for dismissal, the employer must argue convincingly that dismissal cannot be prevented by appealing to NOW. The UWV takes this into account when assessing the dismissal request, because NOW's objective is that to prevent dismissal as much as possible.
Non-renewal of fixed-term contracts, dismissal during the probationary period, parting with a settlement agreement, or termination for a non-economic reason are still possible However, it could affect the amount of the final subsidy if it the wage bill for the months March to May 2020 is less than three times the wage bill for January 2020.
How much revenue loss should the employer have?
There must be at least a 20% loss of revenue to be eligible for the grant.
Must the reason for the drop in turnover be demonstrated?
The NOW applies to situations where there is a revenue decline of at least 20% over a period of 3 consecutive calendar months due to extraordinary circumstances, such as the coronavirus outbreak. Employers do not need to demonstrate the extent to which the extraordinary circumstances contributed to the drop in turnover. The subsidy scheme does not only apply to companies that have a drop in turnover as a result of coronavirus. Another specific situation of extraordinary circumstances to which the subsidy relates and which is mentioned in the regulations is, for example, a drop in turnover due to fire in the employer's company.
What is turnover?
Turnover means "net turnover". It therefore concerns the proceeds from the supply of goods and services from the employer's company, less discounts and tax levied on turnover. In addition, the definition of turnover is in line with the definition as used by the employer in the most recent financial statements.
How is the drop in turnover calculated?
The decrease in turnover must occur over a period of 3 consecutive months, with a start date of 1 March, 1 April or 1 May 2020. The turnover in this reference period is compared with the turnover from January to December 2019, divided by four (25%).
Therefore, if an employer expects that the decrease in turnover will not be measurable until a later date, the reference period of 2020 may start 1 or 2 months later than 1 March 1 2020 (and therefore the period 1 April to 30 June 2020 or the period 1 May until July 31 2020 is considered). However, the subsidy in labour costs will always relate to the labour costs of March, April and May 2020.
What if the employer had a financially bad year in 2019?
No exception is made for such a situation.
Does the employer have to send an auditor's report with its application?
An auditor's report is not required when applying for the advance of compensation. In principle, an auditor's report is required when the definitive subsidy is determined. Clarity will be provided (hopefully in the 4 weeks after publication of the regulation) up to what subsidy amount an audit report will not be required. It will also be clarified what type of auditor's report is required if an auditor's report is indeed required.
What if the employer has submitted an application and ultimately has an insufficient drop in turnover/what if the employer’s estimate is incorrect?
The UWV will determine the final subsidy within 52 weeks of receipt of the application. The settlement may involve a back-payment or, for example, if the loss of turnover has turned out lower, a recovery. If the drop in turnover turns out to be less than 20%, the final subsidy will be 0.
What if the company has not been around that long?
For companies that did not yet exist on 1 January 2019, all calendar months from the moment that the employer's business activities commenced in 2019 until February 2020 are converted into 3-month periods, as reference periods.
How should you deal with a group of companies? What about foreign companies?
Foreign companies may qualify for a subsidy insofar as they employ employees who are socially insured in the Netherlands. Insofar as an employer employs employees who are not socially insured in the Netherlands, the wages of those employees are not to be included in the calculation of the wage bill.
Employers with a foreign bank account number are given the opportunity to provide the UWV with a Dutch bank account number within 4 weeks after applying. For reasons of implementation, it is not possible to process the application under NOW when only a foreign bank account number is provided.
When can employers submit the application?
The UWV aims to open the digital portal for the employers on Monday 6 April 2020, in order for the applications to be submitted. Employers can apply for the compensation until 31 May 2020.
What is the decision period of the UWV?
The UWV will decide on the application for an advance of the compensation within 13 weeks after receipt of the complete application.
Within what period can employer expect any payment?
In no more than three instalments, the employer will receive an advance of 80% of the compensation calculated by themself. The first payment will in principle take place within 2 to 4 weeks after receipt of the application by the UWV. The second and third payment will follow within respectively 1 and 2 months.
Within 24 weeks after the end of the period in which the turnover decrease took place (the measurement period), the employer will request the subsidy to be determined using the form designed for that purpose.
Based on definitive information about the decrease in turnover to be provided by the employer, it is determined how large the actual drop in turnover has been and whether all obligations have been met. This requires an auditor's report. The definitive subsidy will be determined within 52 weeks of receipt of this application. The employer should fill out a specific form provided by the UWV.
The following information should be included in the form:
- the company details: name, address, telephone number, e-mail, contact details
- if the employer submitted an application for short-time work reduction after 31 August 2019, the file number of this application
- the withholding tax number
- the bank account number on which the tax authority receives payments from the employer regarding payroll taxes
- a copy of the bank statement of the bank account, on which the account number and name of the account holder must be clearly visible.
What will happen to short-time work reduction applications submitted before March 18 2020?
This concerns applications under the short-time reduction (WTV) scheme. If these applications have not been decided upon, they will be considered applications under the NOW. As a result, the employer will be requested to provide additional information. Alternatively, the UWV can request the employer to retract its application under the WTV scheme and file for an application under NOW. If employers already use a WTV scheme, then this scheme cannot be extended.
For any future compensation, the employers can apply under NOW. If this causes an overlap between the compensation under NOW and payment of unemployment benefits, these unemployment benefits will be deducted from the wage bills for March to May when the final compensation under NOW is determined.
