The Netherlands temporary emergency scheme for job retention (NOW) provides compensation for the wage costs of employers who expect a loss of turnover of at least 20% over a period of three consecutive months. On 20 May last, the Minister of Social Affairs and Employment (the ‘minister’) sent two letters to parliament. In one letter, the minister announced several changes and additions to NOW 1.0. The other letter to parliament announced that the NOW scheme will be extended by an additional period of three months. The second instalment of the NOW scheme (NOW 2.0) will immediately follow NOW 1.0 and provides for the compensation period 1 June to 31 August 2020.
In this article we will discuss the changes to NOW 1.0. Click here for the article discussing NOW 2.0.
1. Deviation from the reference wage bill
NOW 1.0 stipulates that the compensation will be based on three times the wage bill of January 2020. This has, however, resulted in various companies, such as companies that were preparing for a seasonal peak in spring, being awarded considerably less compensation than their actual wage bill for the period from March to May 2020. The minister has therefore amended the NOW 1.0 as follows:
If the wage bill from March to May 2020 is higher than the wage bill for three times January 2020, the wage bill from March to May 2020 is taken as the basis for calculating the subsidy amount.
The wages and salaries for April and May 2020 are maximized at the amount of wages and salaries of March 2020, meaning that if the actual bill for April and May is higher than that of March, the March figure will be used.
The compensation amount will be adjusted following the final assessment. It will therefore not yet apply to the provisional refund (the advance to be received).
The new calculation method automatically applies to all employers with a higher average wage bill in the period March to May 2020 than during the month of January (capping including). ThIs means employers who have already applied for and have been granted state support under the NOW 1.0 scheme do not have to actively request that the wage bill for the months of March to May be taken as the reference wage bill.
This adjustment will also be of interest for employers who had no wage bill for the months of January 2020 and November 2019. These employers were initially not eligible for compensation under the NOW 1.0 scheme because of the absence of a wage bill for January 2020. These employers may now, provided there is a wage bill for March 2020, apply for NOW 1.0 after all. This must be done by 5 June at the latest. If an employer submitted a NOW application which was rejected because they had no wage bill for January 2020, that employer will be actively requested by the UWV to apply. Our advice however is not to wait for the UWV, but to proactively submit the application yourself.
2. Wage bill and turnover in case of acquisition
Under the NOW 1.0 scheme, the loss of revenue in the chosen period of three consecutive months in 2020, starting on 1 March, 1 April or 1 May is compared with 25% of the annual turnover over 2019. For companies that have taken over (part of) a company, this will often mean that some turnover will have been realised with the acquired business activities in this period. This is likely to present a distorted view of turnover over a period of three consecutive months, which may have an adverse effect on NOW funding.
The minister has therefore determined that these situations will be aligned with the regulations that apply to companies that did not yet exist on 1 January 2019. For these companies, the reference period for turnover will be the full calendar months from the first calendar month following the start date of the business in 2019 up to and including February 2020, converted over three months. There must always be a calendar month between the start of the company and the start of the NOW grant on 1 March 2020.
For companies that have taken over another company, this scheme is applied in such a way that the expected decrease in turnover is compared with the turnover calculated for the period from the date of the takeover up to and including 29 February 2020, converted over three months. In these situations, there must be at least one calendar month between the takeover and the start of the NOW compensation on 1 March 2020.
3. Extra salary period filtered
Under the NOW 1.0 scheme, compensation is based on the wages bill in January 2020. However, employers may have paid out a thirteenth month’s salary in January for example. This means that the wages bill for the month of January 2020 is a lot higher than the wages bill for the month of March. This can be detrimental for employers because of the obligation to keep the wage bill the same as much as possible. When determining the compensation amount, the UWV will therefore filter out so-called ‘extra period’ salaries, such as a thirteenth month, from the wage bill. This leads to a lower wage bill for January 2020 than was actually paid.
4. NOW 1.0 applications possible up to and including 5 June 2020
In view of the adjustments described above, in particular for employers without a wage bill in January 2020, the application period will be extended until 5 June 2020. Employers who could previously not claim assistance under the NOW 1.0 scheme and who therefore did not apply will receive the opportunity to submit an application after all.
5. Threshold for submitting auditor statement
Under the NOW 1.0 scheme, for employers, with a wage bill of an amount to be determined must include an auditor’s report with their application for a determination of compensation. The minister has now announced the threshold amount at which an auditor’s report is required.
There are two thresholds: the first limit is that an auditor’s report is mandatory for employers who have received an advance of at least EUR 100,000. The second threshold is that an auditor statement is also mandatory for employers who have received an advance below EUR 100,000, but who expect their compensation to amount to at least EUR 125,000 upon final assessment. The minister will provide an online tool to help employers determine whether their compensation will amount to at least EUR 125,000. The tool is not yet available.
The minister has explained that these threshold amounts are based on the compensation amount that is allocated to the entire group and not just the compensation per payroll tax number. After all, the loss of turnover is calculated at group level. Incidentally, the Employee Insurance Agency (UWV) figures show that 113,000 NOW applications have been made up to now. About 10% of these were awarded an advance of at least EUR 100,000.
6. No auditor report, but third-party verification
Employers who are not obliged to send in an auditor’s report with their application to determine compensation, but who have received an advance of at least EUR 20,000 or expect a final compensation assessment of at least EUR 25,000, are required to include a statement from a third party confirming the drop in turnover. This third party may, for example, be an administrative office or a financial service provider.
7. Period for application for final assessment of compensation moved
In connection to the extension of the NOW scheme (NOW 2.0), the date by which employers must apply for final assessment of compensation has been postponed. Since the NOW 2.0 scheme compensation period covers June, July and August 2020, employers who only use the NOW 1.0 can apply for a final assessment from 7 September 2020. Employers will now have the opportunity to apply for NOW 2.0 until 31 August 2020. By moving the time period for final assessment, the two application periods will remain separate. For employers who apply for both the NOW 1.0 and the NOW 2.0, the date from which final assessment of the compensation may be requested has not yet been announced.
8. Disclosure of applicants
Finally, the minister has determined that the UWV will publish a list of all employers who have applied for a NOW compensation. The UWV aims to publish this list on its website by the end of June 2020.