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The Netherlands extends its coronavirus job retention scheme: how does it work?

Written by
Bronsgeest Deur Advocaten, leading law firm in the Netherlands specialised in HR and employment law.
The Netherlands has announced a second phase of its corona crisis job retention scheme, NOW. This article provides details of NOW 2.0.

The Temporary emergency scheme for job retention (NOW) in the Netherlands 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 announced that the NOW scheme will be extended by an additional period of three months. The second instalment (NOW 2.0) will immediately follow the NOW 1.0 and provides for the compensation period from 1 June to 31 August 2020.

On 28 May, the minister sent yet another letter to parliament, informing them of additional details and changes to be implemented in the NOW 2.0 scheme. One of these changes is that the duration of NOW 2.0 is to be extended to four months. This means that NOW 2.0 will provide for the compensation period from 1 June to 30 September 2020.

In this article we will discuss NOW 2.0. Please note that the final text of the NOW 2.0 regulation has not yet been published, so the below is subject to change. Click here for the article discussing the changes to the NOW 1.0 scheme.

Basic principles

The NOW 2.0 scheme broadly shares the same basic principles as NOW 1.0. Employers may be eligible for compensation of up to 90% of their total payroll for the period 1 June through 31 August 2020. NOW 2.0 applicants are not required to have also applied under the NOW 1.0. The NOW 2.0 is open to any employer who meets the requirements of the scheme. The minister aims to open the second application period on 6 July 2020.

The NOW 2.0 also stipulates that, in order to receive compensation, the company needs to expect a drop in turnover of at least 20% over a period of three consecutive months. The employer may choose to have this period of three consecutive months start on 1 June, 1 July or 1 August. However, if the employer has applied for the NOW 1.0, the period of three consecutive months must immediately follow the three consecutive months that the company selected to calculate the loss of turnover under the NOW 1.0 scheme.

For example, if the calculation of loss of turnover under NOW 1.0 was based on the three months’ period May, June and July, then the period for which the loss of turnover under the NOW 2.0 must be calculated will automatically be August, September and October.

Changes from NOW 1.0                

In addition to the NOW 1.0 basic principles that are maintained in NOW 2.0, a number of conditions have been changed and added in the NOW 2.0 scheme.

1. Penalty for dismissals on economic grounds

As is the case under the NOW 1.0, the NOW 2.0 prohibits economic dismissals. The penalty for submitting a dismissal application to the Employee Insurance Agency (UWV) under the NOW 1.0 scheme is a compensation reduction of 150% of the wages of the employee(s) for whom a dismissal request is submitted.

The ban will continue to apply under the NOW 2.0 scheme. However, the penalty is adjusted so that compensation will be reduced by 100% of the wages, instead of 150%. This penalty will be imposed on employers who submit a dismissal application (and who do not retract it in time) in the period from 1 June to 31 August 2020.

2. Penalty for collective dismissals without union deal

In addition to the penalty for dismissals on economic grounds, the minister has announced a new penalty to be included in NOW 2.0. This penalty will be levied on employers that intend to dismiss at least 20 employees without having reached an agreement with the trade unions on how to prevent, or mitigate the consequences of, the dismissals. If no agreement can be reached with the trade unions, the employer must file a request for mediation with the Dutch Labour Foundation. If no agreement is reached, and no request for mediation is made, a penalty will be levied. The penalty is equal to 5% of the total amount of compensation the employer receives.

Under the Collective Dismissal Notification Act, employers are obliged to consult the trade unions where there is an intended dismissal of at least 20 employees within a three-month period. It seems that the minister aims to align the penalty with this Act, however it remains to be seen if the alignment will be 100%, or if the NOW 2.0 penalty will deviate from the Act in some way.

3. Surcharge to employer contributions

Under the NOW 1.0 scheme, the January 2020 wage bill was used as the basis for calculating the amount of compensation. This amount was increased by a flat rate surcharge of 30%. This surcharge serves to compensate employers for the additional premiums and costs that they have to deal with, such as employer contributions, employee contributions to pension and the accrual of vacation days. Under the NOW 2.0 scheme, this surcharge is increased from 30% to 40%. The reason for this is that, in addition to wage costs, many employers have other fixed costs that they cannot continue to meet due to the corona crisis. In order to also compensate employers for those fixed costs, the flat-rate surcharge will be increased.

4. Payment of dividends and bonuses, and purchase of own shares prohibited

The NOW 2.0 prohibits payment of dividends and/or bonuses and the (re)purchase of the company’s own shares. This prohibition applies for the whole of 2020 and continues until the shareholders’ meeting in which the annual financial statements are approved in 2021. For companies and institutions that do not operate through a shareholders’ meeting, such as cooperatives, this rule applies up to the meeting at which the annual accounts are approved in 2021.

However, the ban does not apply to every employer who receives compensation under the NOW 2.0 scheme. The ban only applies to companies that receive a compensation amount for which an auditor’s report is required. See the article discussing the NOW 1.0 , point  5 where the thresholds triggering the requirement for an auditor report is discussed).

The ban on bonuses only applies to bonuses paid to the board and management of the company. Payment of bonuses for all other personnel working in the company is allowed. In addition, the prohibition does not apply to dividends, bonuses and shares for 2019, since the decisions about these are presumed to have been taken before the onset of the Covid-19 crisis in the Netherlands.

5. ‘NL continues to be educated’

The government will launch the ‘NL continues to be educated’ initiative. This initiative aims to support people who are at risk of losing their work or have already lost their work as a result of the crisis. The initiative consists of development advice and online training. The government aims to launch the initiative in July 2020 and will run until the end of 2020.

Under the NOW 2.0 scheme, employers who make use of the scheme are required to make an effort to encourage their employees to request development advice or to receive training for job retention.