04 september 2020

What’s new? NOW 3.0 continues to provide (more limited) compensation for wage costs, but allows for reorganisation.

NOW 2.0 will end on 1 October, but for many employers financial support is essential and it is crucial to be able to adapt to the new economic situation.The Dutch Government will extend the Temporary Emergency Bridging Measure for the Preservation of Work (NOW) with effect from 1 October, but the scheme deviates from the existing scheme on a number of points. In this blog we will explain the most important changes of NOW 3.0 compared to NOW 2.0. We conclude with an overview of each of the three timeframes mentioned in NOW 3.0.

What are the most important changes compared to NOW 2.0?                                                                     

  • NOW 3.0 shall apply from 1 October 2020 until 1 July 2021 (three three-month periods with amended terms and conditions).
  • For the first period, a minimum loss of turnover of 20% (equal to NOW 2.0) applies. The minimum loss of turnover required to qualify for the scheme will increase from 20% to 30% for the second period (January to June 2021).
  • The financial aid over nine months is subject to a gradual decrease in compensation rates: from 80%, to 70% to 60%.
  • In return for the reduction of compensation, there is the possibility of gradually reducing the wage costs by 10%, 15% and 20% without this being at the expense of the compensation. The adjustment to the granted compensation in the event of a reduction in the wage costs is hence partially removed.
  • The maximum reimbursable wage per employee will be reduced in the third period (April, May, June 2021) to a maximum of the daily wage (instead of twice the daily wage).
  • The penalty applied in NOW 2.0 in the event of dismissal on economic grounds no longer applies. However, the ban on bonuses and dividends remains in full force and effect. It is not yet clear until when this ban will be lifted.

For each period, an employer may decide whether or not to submit an application for compensation. Even if an employer has not claimed NOW 1.0 or NOW 2.0, the employer can make use of NOW 3.0. Just as with NOW 1.0 and NOW 2.0, an employer will receive an advance payment of 80% of the requested compensation after the application has been made and will receive the remaining 20% after approval.   

The dismissal penalty and the reduction of the wage costs under NOW 2.0   

Earlier, we pointed out that an employer risks a dismissal penalty if, in the period from 1 June 2020 to 30 September 2020, the period covered by NOW 2.0, a request for dismissal on business economic grounds is submitted and is not withdrawn in time, being within five working days. In that case, 90% of the wage costs of the employee(s) for whom dismissal has been requested will be deducted from the compensation. No distinction is made between the type of business economic ground when it comes to the ban on submitting a request for dismissal: every so-called ‘a-ground’ falls under this ban.

In addition, NOW 2.0 determines that the total compensation will be reduced by 5% if the employer submits one or more notifications regarding a collective dismissal during the period from 30 May 2020 to 30 September 2020 inclusive and requests the dismissal on business economic grounds for 20 or more employees in a working area as referred to in the Collective Redundancy (Notification) Act during this period. For this penalty it makes no difference for how many employees a request for dismissal has been submitted; if the threshold of 20 is met, the penalty will be imposed. The penalty is not directly linked to requests for dismissal resulting from a notification as referred to in the Collective Redundancy (Notification) Act; the conditions are assessed separately.

NOW 2.0 does not prevent the termination of employment contracts on other grounds. For example, the prohibition on dismissal does not concern termination due to underperformance or not extending a fixed-term employment contract. Termination by mutual consent is also possible under NOW 2.0. However, the government has explicitly stated that it expects the employer to make every effort to keep the wage costs as constant as possible. For this reason, a correction has been introduced in the regulation. If the average wage costs for the months of June, July, August and September are lower than the wage costs for March 2020 (or, if no data are available, November 2019), the amount of the compensation will be reduced by 90% of the amount by which the wage costs were reduced.

Limited consequences reduction of wage costs and no dismissal penalty under NOW 3.0

The employer can also receive compensation of wage costs under NOW 3.0. This compensation is maximised at a percentage of the total wage costs. The employer receives the maximum compensation in the event of a 100% loss of turnover. In the event of a lower loss of turnover, the compensation will also be proportionally lower. As stated above, the maximum compensation will be gradually reduced per period: in the first period – from 1 October onwards – the maximum compensation percentage will be 80%, in the second period 70% and in the third period 60%.

At the same time, the Dutch Government wants to give employers with a long-term loss of turnover the opportunity to reduce part of the wage costs, without this leading to a reduction in the amount of compensation. The exempted percentage is the percentage of the total wage costs that the employer can reduce without this having an impact on the level of compensation. The exempted percentage increases from 10% in the first period to 15% in the second period and 20% in the third period. For employers, this not only means that the opportunity of gradual reduction (not renewing fixed-term contracts and not filling vacancies that fall vacant) arises, but under certain circumstances it is also possible to ask the employees for a wage sacrifice. 

In addition, the penalty imposed in NOW 2.0 in the event of dismissal on business economic grounds is removed. This allows employers to restructure their organisations from October onwards without this having a direct negative impact on the amount of compensation. In our next blog we will inform you in more detail about the steps to be taken in the event of a reorganisation.

Periods in overview

Period 1 (October, November, December 2020)

•             Percentage of compensation: 80%

•             Loss of turnover: 20%

•             Exempted percentage reduction wage costs: 10%

•             Maximum compensation per employee: 2x daily wage

•             Penalty for dismissal a-ground: No

•             Bonus- dividend ban: Yes

Period 2 (January, February, March 2021);

•             Percentage of compensation: 70%

•             Loss of turnover: 30%

•             Exempted percentage reduction wage costs: 15%

•             Maximum compensation per employee: 2x daily wage

•             Penalty for dismissal a-ground: No

•             Bonus/dividend ban: Yes

Period 3 (April, May, June 2021);

•             Percentage of compensation: 60%

•             Loss of turnover: 30%

•             Exempted percentage reduction wage costs: 20%

•             Maximum compensation per employee: daily wage

•             Penalty for dismissal a-ground: No

•             Bonus/dividend ban: Yes

The exact terms and conditions of NOW 3.0 – including when the advance payment of the compensation can be requested – are currently being worked out in more detail and will be announced no later than 1 October 2020. We will keep you informed.

Would you like to know more?

Would you like to know more about NOW 3.0 or the steps to be taken in the event of a reorganisation? Contact Yvette Dissel (dissel@boontje.nl) and/or Björn Schouten (schouten@boontje.nl). You can also contact them by telephone via + 31 20 – 572 7190. Of course, our Corona Reorganisatie Team is at your service for all your questions relating to NOW, reorganisation and restructuring.