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Coronavirus - Further extension of emergency measure – NOW 3.0 - Netherlands
- Netherlands
- Coronavirus - Workforce issues
- Employment law
02-09-2020
On 28 August 2020, the Dutch government announced that the Temporary Emergency Measure for Job Retention (in Dutch: Tijdelijke noodmaatregel overbrugging voor werkbehoud or “NOW”) will be extended as of 1 October 2020 (“NOW 3.0”). NOW 3.0 will apply until 1 July 2021 and is divided into three periods, each with a duration of three months: 1 October 2020 to 31 December 2020, 1 January 2021 to 31 March 2021 and 1 April 2021 to 30 June 2021. The conditions under which companies are eligible for NOW 3.0 compensation and the obligations they have to meet in that context may vary from period to period.
The extension of the NOW scheme shall first and foremost help companies in need of support to maintain employment as much as possible. In addition, the extension of the scheme will offer companies the opportunity to prepare their organization for the new economic situation in which not all jobs can be maintained. There will be room for employers to reduce their wage sum without this being at the expense of the granted NOW compensation. NOW 3.0 also intends to give companies more clarity with respect to the gradual reduction of financial support from the Dutch government.
It is expected that applicants will be able to file applications for NOW 3.0 as of 16 November 2020, with the possibility to submit an application retroactively for the first three-month period (i.e. from 1 October 2020 to 31 December 2020). Employers may decide whether they will file an application for each of the three periods, irrespective of whether they have also applied for NOW 1.0 and/or NOW 2.0.
The key details of NOW 3.0 that have been announced by the government thus far are set out below.
Calculation period for loss of revenue
During the first three-month period and therefore, until 31 December 2020, NOW 3.0 will apply to employers who expect to suffer a loss of revenue of at least 20%. As from 1 January 2021, this percentage will be increased and NOW 3.0 will only apply to employers who expect to suffer a loss of revenue of at least 30%.
It is still unclear over which period the (expected) loss of revenue should be calculated. It is expected that the further terms and conditions of NOW 3.0 will be announced no later than 1 October 2020.
Level of compensation and best efforts obligation training and work-to-work guidance
Similar to NOW 1.0 and NOW 2.0, employers can apply for a contribution to the wage costs (including a 40% increase for employer costs such as pensions) of up to 90% of the total salary for their employees during the first three-month period of NOW 3.0. However, the government has explained that companies are obliged to use part of the total wage sum for which they receive compensation, i.e. 10%, for training and work-to-work guidance. Employers will continue to be obliged to make strenuous efforts to encourage their employees to take retraining or reskilling courses, seek career development advice and to provide employees work-to-work guidance pursuant to NOW 3.0. With these regulations, the government wishes to avoid people needing to appeal to social security benefits as far as possible. Therefore, the level of compensation that will be granted to companies to compensate for wage costs will actually amount to up to 80% of the total salary.
Further details regarding this obligation are yet to be published. As a result, it is not clear whether the obligation for companies to use 10% of the total salary for training and guidance will continue to apply in the second and third three-month periods of NOW 3.0.
It has been announced, however, that as of 1 January 2021, the percentage of compensation will be slowly reduced to up to 70% of the total salary of employees. As of 1 April 2021, employers can apply for a contribution to the wage costs of up to 60% of the total salary of employees. If, in addition, there would be an obligation for employers to use part of the total wage sum for which they receive compensation for encouraging employees to undergo training and/or provide work-to-work guidance, this may result in an even lower compensation.
For the purpose of calculating the compensation pursuant to NOW 3.0, individual salaries will as a general rule also be capped at EUR 9,538 gross per month, as was the case pursuant to NOW 1.0 and NOW 2.0. However, as of the third three-month period and therefore, as of 1 April 2021, this cap will be reduced to EUR 4,769 gross per month.
Possibility to reduce wage sum and lapse of penalty and/or reduction for dismissal due to business-economic reasons
The Dutch government wishes to provide employers who suffer a long-term loss of revenue the opportunity to reduce (part of) the total wage sum, without this having an effect on the NOW compensation applied for. To achieve this, NOW 3.0 introduces a so-called “exemption rate”.
The exemption rate is the percentage of the total wage sum (i.e. the number of employees) that the employer may reduce without this affecting the level of compensation of the total salary. During the first 3-month period of NOW 3.0 and therefore until 31 December 2020, the exemption rate will amount to 10% of the total wage sum. After this date, the exemption rate will rise to 15% during the second three-month period of NOW 3.0 (1 January 2021 to 31 March 2021) and to 20% during the third three-month period of NOW 3.0 (1 April 2021 to 30 June 2021).
Employers may determine whether and if so, in which way they want to reduce the total wage sum in consultation with the Works Council, or if there is no Works Council, the Employee Representative Body and/or employees. Such a reduction can be brought about through, for example, natural turnover in employees and/or redundancies. The NOW penalties and/or reductions in the final compensation that applied to dismissal due to business-economic reasons no longer apply.
Comparison of NOW schemes
NOW 3.0 is the successor to the initial Temporary Emergency Measure for Job Retention (“NOW 1.0”), published on 31 March 2020, and the Second Temporary Emergency Measure for Job Retention (“NOW 2.0”), announced on 22 June 2020. Please find an overview and comparison of the three different NOW schemes below.
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NOW 1.0 |
NOW 2.0 |
NOW 3.0 |
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Conditions for eligibility |
Employers that expect to suffer a loss of revenue of at least 20% during a consecutive period of three months between 1 March and 31 July 2020. |
Employers that expect to suffer a loss of revenue of at least 20% during a consecutive period of four months between 1 June and 30 November 2020. |
1 October 2020 to 31 December 2020 Employers that expect to suffer a loss of revenue of at least 20% during a consecutive period of three months. 1 January 2021 to 30 June 2021 Employers that expect to suffer a loss of revenue of at least 30% during a consecutive period of three months. |
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Period used for the purpose of calculating the loss of revenue (“NOW-calculation period”) |
Consecutive period of three months starting on either 1 March 2020, 1 April 2020 or 1 May 2020. |
Consecutive period of four months starting on either 1 June 2020, 1 July 2020 or 1 August 2020. Employers which also applied for NOW 1.0 shall ensure that the NOW 2.0 calculation period is directly adjacent to the period used for the NOW 1.0 loss of revenue calculation. |
TBC |
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Calculation loss of revenue |
Deducting the expected revenue during the NOW-calculation period from the reference revenue, defined as 25% of the employer’s revenue in 2019, and dividing this amount by the reference revenue. As a general rule, NOW 1.0 concerns the (expected) loss of revenue of the legal entity. However, in case of a group of companies (within the meaning of article 2:24b Dutch Civil Code), the decrease in revenue at group level applies. A group includes foreign group companies to the extent that these pay wages in the Netherlands. An exemption to the above rule may apply to operating companies that suffer a loss of revenue of at least 20%. Key requirements in this context are:
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Deducting the expected revenue during the NOW-calculation period from the reference revenue, defined as 1/3 of the employer’s revenue in 2019, and dividing this amount by the reference revenue. As a general rule, NOW 2.0 concerns the (expected) loss of revenue of the legal entity. However, in case of a group of companies (within the meaning of article 2:24b Dutch Civil Code), the decrease in revenue at group level applies. A group includes foreign group companies to the extent that these pay wages in the Netherlands. An exemption to the above rule may apply to operating companies that suffer a loss of revenue of at least 20%. Key requirements in this context are:
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TBC |
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Application period for advance on compensation |
From 6 April 2020 9.00 AM through 31 May 2020 |
From 6 July 2020 through 31 August 2020 |
As from 16 November 2020 (expected at this time) |
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Documents needed for initial application |
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TBC. Expected that no changes will be made compared to NOW 2.0. |
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Formula for calculating advance on compensation |
A* x B* x 3 x 1.3 x 0.9 = expected compensation, of which 80% will be paid as advance payment A* = % expected loss of revenue B* = total salary owed for January 2020, which will be determined based on the wage tax declaration which was filed ultimately on 15 March 2020 |
A* x B* x 3 x 1.4 x 0.9 = expected compensation, of which 80% will be paid as advance payment A* = % expected loss of revenue B* = total salary owed for March 2020, which will be determined based on the wage tax declaration which was filed ultimately on 15 May 2020 |
1 October 2020 to 31 December 2020 A* x B* x 3 x 1.4 x 0.9 = expected compensation, of which 80% will be paid as advance payment A* = % expected loss of revenue B* = total salary owed for a certain reference period which is TBC Employers are obliged to use at least 10% of the total wage sum for which they receive NOW compensation to encourage employees to undergo retraining or reskilling courses, seek career development advice and to provide employees work-to-work guidance. 1 January 2021 to 31 March 2021 A* x B* x 3 x 1.4 x 0.7 = expected compensation, of which 80% will be paid as advance payment A* = % expected loss of revenue B* = total salary owed for a certain reference period which is TBC 1 April 2021 to 30 June 2021 A* x B* x 3 x 1.4 x 0.6 = expected compensation, of which 80% will be paid as advance payment A* = % expected loss of revenue B* = total salary owed for a certain reference period which is TBC Further details still TBC. It is unclear whether employers will be obliged to use part of the total wage sum for which they receive NOW compensation for the purpose of training and/or work-to-work guidance during second and third three-month periods of NOW 3.0. |
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Period for which compensation will be received |
March, April and May 2020. |
June, July, August and September 2020. |
October until December 2020, January until March 2021 and/or April until June 2021. |
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Restrictions on redundancies |
Employers shall refrain from filling an application to request a dismissal permit for business-economic reasons from 18 March 2020 up to and including 31 May 2020. If an employer files a request for permission to give notice of termination for business-economic reasons at the UWV and does not withdraw this request within the applicable period, 1.5x the sum of the salary of the employees affected by this will be deducted from the total salary for which compensation will be awarded. |
Employers shall as general rule refrain from filing an application to request a dismissal permit for business-economic reasons from 1 June 2020 up to and including 30 September 2020. If an employer files a request for permission to give notice of termination for business-economic reasons during this period, the NOW 2.0 grant will be reduced with the sum of the salaries saved by the employer by making redundancies. No additional penalty applies. In the event that the employer decides to make 20 redundancies or more in the UWV region (and therefore has to notify the UWV and labour unions of a collective redundancy pursuant to the Collective Redundancy (Notification) Act (in Dutch: “Wet Melding Collectief Ontslag” or “WMCO”) it must:
A penalty (“WMCO penalty”) applies in the event that the employer fails to comply with the obligation to (a) reach an agreement with the labour unions regarding the amount of positions which need to be made redundant or alternatively (b) request mediation in that respect by a committee formed by the Labour Foundation. The penalty is 5% of the final compensation after the reduction of the salary of employees for whom a dismissal permit was requested and is ‘paid’ by reduction of the penalty amount from the final compensation. |
The penalties and/or reductions that applied to dismissals due to business-economic reasons and/or the WMCO penalty no longer apply. Instead, employers who suffer a long-term loss of revenue are offered the opportunity to reduce (part of) the total wage sum, without this having an effect on the NOW compensation applied for, by ways of an exemption rate. The exemption rate amounts to:
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Prohibition to pay bonus or dividends |
N/A |
Companies that expect to receive a compensation for which an auditor’s report is required (see “Auditor’s report required for application final compensation?” below) shall not pay any bonuses to the board of directors, management and leadership, distribute dividends or other profit distributions and/or repurchase shares for 2020, until the date at which the annual report of 2020 has been determined (by the general meeting of shareholders) in 2021. Regular employees remain entitled to their variable compensation through bonuses. In the event that the exception for group operating companies is applied, this prohibition will also apply to the parent company. The above prohibition does not apply if the employer has a statutory duty to pay dividends or is required to do so on the basis of a statement of findings (“Vaststellingsverklaring”) agreed upon with the Dutch Tax Authority. |
No changes compared to NOW 2.0. |
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Best efforts obligation re training and work-to-work guidance for employees |
N/A |
Employers are obliged to make strenuous efforts to encourage their employees to take retraining or reskilling courses or seek career development advice, for example by providing them with free time and/or resources through a R&D fund. Employers are not obliged to provide employees with (compensation for) such training. It is expected that the government will issue a crisis response package called “NL continues to learn” (in Dutch: NL leert door) to this end. |
Continued obligation for employers to encourage employees to take retraining or reskilling courses, seek career development advice and to provide employees work-to-work guidance. Additional obligation to use at least 10% of the total salary of employees for which NOW compensation is received for the purpose of offering training and/or work-to-work guidance. Not clear whether this obligation will continue to apply in the second and third three-month periods of NOW 3.0. |
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Additional conditions |
Employers are required to:
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Employers are required to:
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TBC. It is expected that no changes will be made compared to NOW 2.0. |
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Application for final compensation |
Applications can be filed from 7 October 2020 (expected at this time) until ultimately 24 weeks after the three-month period which the employer used for the calculation of the loss of revenue has lapsed. For the applications for final compensation that require an auditor’s report, the application period will be extended to 38 weeks. |
Applications can be filed as of 15 November 2020 (expected at this time) and ultimately 24 weeks after the four-month period which the employer used for the calculation of the loss of revenue has lapsed. For the applications for final compensation that require an auditor’s report, the application period will be extended to 38 weeks. |
TBC |
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Formula for calculating final level of compensation |
A x B x 3 x 1.3 x 0.9 = final compensation A = % actual loss of revenue B = the total salary as follows from B* in the calculation for the advance payment above, with the exception that:
In the event that the salary costs for 1 March – 31 May 2020 (defined as C) are less than three times the salary defined as B, the compensation shall be reduced by applying the following formula: (B x 3 – C) x 1.3 x 0.9 The actual wage costs (C) will be based on the employer’s wage tax declaration as filed by the employer to the Tax Inspectorate ultimately on 19 July 2020. |
A x B x 3 x 1.4 x 0.9 = final compensation A = % actual loss of revenue B = total salary paid for the third wage reporting period of 2020, based on the wage tax declaration which was filed ultimately on 15 May 2020, with the exception that:
In the event that the salary costs for 1 June – 30 September 2020 (defined as C) are less than four times the salary defined as B, the compensation shall be reduced by applying the following formula: (B x 4 – C) x 1.4 x 0.9 The actual wage costs (C) will be based on the employer’s wage tax declaration as filed by the employer to the Tax Inspectorate ultimately on 16 November 2020. |
1 October 2020 to 31 December 2020 A x B x 3 x 1.4 x 0.9 = final compensation A = % actual loss of revenue B = total salary paid for a certain reference period which is TBC, with the exception that:
1 January 2021 to 31 March 2021 A x B x 3 x 1.4 x 0.7 = final compensation A = % actual loss of revenue B = total salary paid for a certain reference period which is TBC, with the exception that:
1 April 2021 to 30 June 2021 A x B x 3 x 1.4 x 0.6 = final compensation A = % actual loss of revenue B = total salary paid for a certain reference period which is TBC, with the exception that:
Further details still TBC. |
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Disclosure |
As of the end of June 2020, the UWV will publish information on which companies have applied for the NOW 1.0, including the advance payments made and amounts of final compensation awarded on its website. |
No changes compared to NOW 1.0. |
It is expected that no changes will be made compared to NOW 1.0 and NOW 2.0. |
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Auditor’s report required for application final compensation? |
An auditor’s report shall have to be included in the application for final compensation from companies that (i) receive an advance payment of EUR 100,000 or more or (ii) expect to receive a final compensation of more than EUR 125,000. |
No changes compared to NOW 1.0. However, for groups of companies that apply for NOW 2.0 to compensate the loss of revenue for operating group companies, an auditor’s report is mandatory irrespective of the amount of compensation received. Additionally, a report from an expert (as to be defined by the Minister) will be required for companies that: (i) receive an advance payment (80% of the amount of expected final compensation) of EUR 20,000 or more; or (ii) expect to receive a final compensation amounting to EUR 25,000 or more. |
It is expected that no changes will be made compared to NOW 1.0 and NOW 2.0. |
This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.
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