Temporary Emergency Measure for the Preservation of Work (‘’NOW’’) and Unemployment Insurance Act premium differentiation

Yesterday evening, March 17, the Dutch government announced a package of exceptional economic measures  in view of the coronavirus. These measures include:

• the immediate repeal of the short-time working scheme;
• the simultaneous introduction of the new ‘Tijdelijke noodmaatregel overbrugging voor werkbehoud’ (in English: Temporary Emergency Bridging Measure for the Preservation of Work (hereinafter: the ”NOW”);
• relaxation of the measures with regard to differentiation of the Unemployment Insurance Act premiums.

These measures will be specified in the coming period. The broad outlines have already been announced by the government. We share these outlines with you in this memorandum.

Content NOW

The NOW is a new scheme, which is completely separate from the short-time working scheme and the Unemployment Insurance Act (Dutch: ‘WW’). Under the NOW, employers can apply for a compensation for labour costs if they expect a loss in turnover of at least 20%. The scheme relates to decreases in turnover as from 1 March 2020.

It appears that the NOW deviates from the short-time working scheme on a number of important points. Contrary to the short-time working scheme, the NOW is about a reduction in turnover and not about a reduction in working hours. Under the short-time working scheme, it was possible that the loss of turnover was greater than the loss of work. This difference between the two schemes can therefore work to the advantage of entrepreneurs. A second difference to the short-time working scheme is that the NOW no longer differentiates between individuals: the (expected) loss of turnover of the entire company is taken into account.

The NOW applies to employers that are faced with at least 20% expected loss of turnover. The employer is obliged pay the wages of the employees in full, but can apply for a compensation of the wage costs at the UWV (the Dutch Employee Insurance Agency). The compensation of wage costs depends on the (expected) decrease of turnover, and amounts to a maximum of 90% of the wage costs. The relationship between the two is as follows: the percentage of compensation of the wage costs is equal to a factor of 0.9 of the percentage of the employer’s loss of turnover. The relationship between the decrease in turnover and the amount of compensation is set out in the examples below:

• if 100% of the turnover is lost, the compensation amounts to 90% of the wage costs of the employer;
• if 50% of the turnover is lost, the compensation amounts to 45% of the wage costs of the employer;
• if 25% of the turnover is lost, the compensation amounts to 22.5% of the wage costs of the employer.

The fact that the NOW is a compensation for wage costs, also constitutes a difference with the short-time working scheme. In case of a reduction in working hours, the employer was exempted from paying wages with respect to the part for which the reduction in working hours was requested. Instead, employees (if they met the applicable conditions) received an unemployment benefit, which was lower than the actual wage. In practice, some employers chose to supplement the unemployment benefit to the original level, but they were not obliged to do so. This is different for the NOW, because the employer’s obligation to pay wages is not (partially) waived. This is in the advantage of employees. Moreover, because the NOW is separated from the Unemployment Insurance Act, the employee’s to unemployment benefit rights are not affected. Contrary to the short-time working scheme, on the basis of the NOW, the employee will have to be available for work for 100% of the agreed working time. After all, the working time is not reduced.

The government has announced that, on the basis of the NOW, compensation for wage costs can also be requested for employees with flexible contracts. Temporary employment agencies may also apply for compensation with respect to temp workers employed by them, also if these employees have a temporary employment agency clause. This was not possible on the basis of the short-time working scheme.

The information made available so far does not show that the allowance for wage costs is capped to a maximum wage (e.g. the maximum daily wage as referred to in the Unemployment Insurance Act). This would mean that the allowance also applies in full to employees with high salaries. It is uncertain whether this is indeed the case.

The duration of the compensation is 3 months. This period may be extended once for a further period of 3 months. The scheme may stipulate (in advance) that the extension of the compensation will be subject to further conditions. It is yet however unknown what these further conditions will entail.

When applying for compensation on the basis of the NOW, the employer commits in advance to the obligation not to apply for dismissal on economical or organizational grounds for its employees during the period for which the compensation for wage costs is received. It seems possible to dismiss an employee during this period due to a different ground for dismissal (e.g. poor performance or a disrupted employment relationship).

Assessment of the NOW application

The UWV will be responsible for the assessment of the application on the basis of the NOW. It is not yet possible to submit this application. The government has announced that loss of turnover from 1 March 2020 will be eligible for a compensation for wage costs. The arrangement will therefore have retroactive effect.

On the basis of the application, the UWV will make an advance payment of the compensation for wage costs. This advance payment will amount to at least 80% of the compensation. On the basis of the information that will have to be provided, it can be determined in retrospect whether the advance payment was too large or too limited, and the definitive contribution can be determined. This may result in a supplementary payment or a reimbursement obligation. In case of large applications, an auditor’s report may be required in order to determine the final compensation.

Already submitted short-time working scheme applications

The NOW replaces the current short-time working scheme. Already submitted (not yet processed) applications for the short-time working scheme will be considered as submitted applications for the NOW. Additional information will be requested from the submitters, who will be notified accordingly. If you have already received an exemption permit for the reduction of working hours under the short-time working scheme, this permit will remain in force for the period for which the permit was granted. In the event of a possible renewal, this application has to submitted on the basis of the NOW.

WW premium differentiation

Finally, the government also announced a number of measures with regard to the differentiation of Unemployment Insurance Act premiums. These measures include the following:

• (As yet unknown) changes will be made to the rule that the employer has to pay the high premium rate, if employees have worked more than 30% overtime in a calendar year. This rule can now lead to undesired consequences in sectors where the coronavirus requires a lot of extra overtime (e.g. health care);
• Employers were given the opportunity until 1 April 2020 to draw up a permanent employment contract in writing, in order to meet the conditions for the low premium rate. For practical reasons, this period will be extended until 1 July 2020.

More questions?

Please contact our lawyers:

T + 31 0(20) 572 71 90