On 31 March, Minister Wouter Koolmees of Social Affairs and Employment announced the details of the government’s NOW job retention scheme for employers. Under the scheme, employers are entitled to submit a claim for a grant to the Employee Insurance Agency (UWV). This article explains the most important aspects of the scheme.
What conditions do you need to meet in order to qualify for an NOW grant?
If you expect your turnover to decline by at least 20% during an uninterrupted period of three calendar months between 1 March and 31 July, you may be eligible for a grant to cover part of your wage costs during the period from 1 March to 31 May.
How large is the provisional grant?
The provisional grant is worth 80% of: A x B x 3 x 1.3 x 0.9, where:
- A is the percentage decrease in turnover that you expect to take place
- B is the aggregate wage bill paid during (in principle) the first tax period in 2020. Normally speaking, this will therefore be the wage bill for January 2o2o. Bear in mind that the maximum eligible wage per employee is €9,538 per month. In other words, any wages paid in excess of €9,538 per month do not qualify.
The maximum value of the grant payable for the period from 1 March to 31 May 2020 is therefore 100% (where A is 100%, representing a 100% decline in turnover) of 90% (i.e. a factor of 0.9) of the wage bill for January 2020 (factor B) multiplied by 1.3.
How is the decrease in turnover (A) calculated?
The decrease in turnover is calculated by dividing the difference between the reference turnover and the turnover earned during the measurement period, by the reference turnover. In other words:
Reference turnover – turnover earned during the measurement period
The reference turnover is the turnover earned between January and December 2019 divided by four, i.e. the average turnover per quarter. If your company did not start trading until after 1 January 2019, your reference turnover is the turnover you earned during the period from the first calendar month after the date on which you started trading until 29 February 2020, converted into a quarterly figure.
Employers can opt for one of the three following measurement periods:
- 1 March to 31 May 2020; or
- 1 April to 30 June 2020; or
- 1 May to 31 July 2020.
In other words, the measurement period is always an uninterrupted period of three months. You must opt for a specific measurement period when you apply for an NOW grant. You cannot switch to a different measurement period when the time comes to calculate the final value of the grant.
Irrespective of which measurement period you opt for, the grant itself always applies to your wage bill during the period from 1 March to 31 May 2020.
Rules on group companies
If your company is a member of a group, the grant application is in principle based on the decline in turnover applying to the group as a whole as it was composed on 1 March 2020.
Update (23 April 2020): rules on group companies relaxed (subject to certain conditions)
If the decline in the turnover earned by a group as a whole is less than 20%, but if an individual group company expects its own turnover to fall by 20% or more, it is now possible for the individual group company to apply for a grant to cover its wage costs, based on its own turnover figure.
How is the decrease in turnover calculated (example)?
et’s take a business whose average turnover in 2019 was €100,000 per month, i.e. the turnover figure for the year as a whole was €1,200,000. The employer in question opts for the period from 1 March to 31 May 2020 as the measurement period, i.e. the period over which the decline in turnover is calculated. The average turnover during this period is €70,000 per month, i.e. €210,000 for the whole period. In this case, the decline in turnover is therefore as follows:
(€1,200,000 / 4) – €210,000 = 0.30 = 30%
(€1,200,000 / 4)
How is the wage bill (B) calculated for the purpose of the provisional grant?
The wage bill as calculated for the purpose of the provisional grant is based on the wages paid during the first tax period in 2020. For the majority of employers, this means their wage bill in January 2020. Where an employer applies a four-week tax period, the wage bill for the period is raised by 8.33%. If the UWV’s benefits database for January 2020 does not contain any wage data for January 2020, the UWV will then use the data for November 2019. If no data are available for this period either, no grant will be awarded.
How is the provisional grant calculated (example)?
Let’s take the case of an employer who opts for 1 March to 31 May 2020 as the measurement period, i.e. the period during which the decline in turnover is calculated. Say the wage bill for January 2020 was €3,500,000 and the employer expects turnover to fall by 25%. This means that the grant is expected to be worth (0.25 x €3,500,000 x 3 x 1.3 x 0.9) = €3,071,250 in total. The employer receives a provisional grant representing 80% of this amount, i.e. €2,457,000.
How is the final value of the grant calculated?
The final value of the grant is calculated by comparing the wage bill used for calculating the provisional grant with the actual wage bill for the period from 1 March to 31 May 2020. If the actual wage bills turns out to be lower, for example because wages for staff employed under flexible contracts were not paid throughout the period, or if the actual decline in turnover proves to be less than expected, the final value of the grant will be lower and the employer will be require to refund the difference. Please note that, if the wage bill for March, April and May 2020 turns out to be higher than expected, this will not result in an increase in the final value of the grant.
The final value of the grant is calculated in two stages as follows:
- In principle, the final grant is the result of:
% of the actual decline in turnover x the wage bill (B) as calculated for the purpose of the provisional grant x 3 x 1.3 x 0.9
- If the actual wage bill is lower than the amount (B) as calculated for the purpose of the provisional grant, the value of the grant is reduced by the result of the following formula:
(the wage bill (B) as calculated for the purpose of the provisional grant x 3) – the actual wage bill for the period from 1 March to 31 May 2020) x 1.3 x 0.9.
How is the final value of the grant calculated (example)?
Let’s again take the case of an employer who opts for 1 March to 31 May 2020 as the measurement period, i.e. the period during which the decline in turnover is calculated. The provisional grant is calculated on the assumption that the wage bill for January 2020 would be €1,000,000 and that there would be a 50% decline in turnover. This results in a grant worth (0.5 x €1,000,000 x 3 x 1.3 x 0.9) = €1,755,000 in total. The employer is paid a provisional grant of 80% of this figure, i.e. €1,404,000.
Let’s assume that the actual decline in turnover does prove to be 50%, but that the actual wage bill for March, April and May 2020 is €2,400,000. The difference between the size of the wage bill on which the provisional grant is based and the actual wage bill is then applied as follows in calculating the value of the final grant:
First step: The provisional grant is based on projections, i.e. €1,755,000 in total (0.5 x €1,000,000 x 3 x 1.3 x 0.9).
Second step: As the actual wage bill is €600,000 lower in total than projected, the value of the grant needs to be reduced. The size of the reduction is: ((€1,000,000 x 3) – €2,400,000) x 1.3 x 0.9 = €702,000.
So the final value of the grant is €1,755,000 – €702,000 = €1,053,000. As the employer has already received a provisional grant of €1,404,000, the employer is required to repay €351,000 (i.e. €1,404,000 – €1,053,000).
Is an employer entitled to lay off staff?
Under the terms of the NOW scheme, you are not allowed, during the period from 18 March up to and including 31 May 2020, to apply to the UWV for the dismissal of staff on economic grounds. If you do submit an application for dismissal, this will affect the size of your NOW grant. The value of the wage costs of the staff whose dismissal you are requesting – plus a 50% penalty – will then be deducted from the total wage bill on which the grant is based. This deduction will be made in respect of all dismissal applications you submit during the period from 18 March to 31 May, irrespective of whether the UWV decides to grant or reject them.
The above means, by the way, that you are still entitled to lay off staff on other grounds.
What are your obligations?
The NOW scheme lists a number of obligations that employers need to meet. Employers are required, for example:
- . to do their best to maintain their wage costs at the same level. This means that you must do your utmost to retain jobs by ensuring that contracts of employment remain in force and that you continue to pay your staff their wages
- use the grant exclusively for paying wages;
- to notify the Works Council or the staff representative body or (should no such bodies exist in their company) their staff that they have been awarded an NOW grant;
- to maintain a clear audit trail, so as to enable a retrospective check to be performed in order to ascertain whether the grant was awarded with good reason;
- to submit a wage tax form (loonaangifte) within the time limits laid down in the law;
- to give immediate notice of any circumstances or factors that could affect a decision to amend, withdraw or make a final assessment of the grant;
- to submit, after the end of the period for which the grant was awarded, a statement showing the final figures for the decline in turnover and including an auditor’s report prepared by an accountant as defined in section 1 of the Accountancy Profession Act.
- if they are in receipt of a wage cost subsidy from the local authority, to notify the local authority in question that they have been awarded an NOW grant.
Does the NOW scheme also cover additional costs?
Yes, it does. These include employer’s and employee’s pension contributions and payments towards holiday allowances. Because of the need to ensure that the scheme remains easy for the UWV to enforce, the government has decided to apply a flat-rate 30% mark-up on top of the grant to cover employer’s contributions, rather than calculating the precise amount in each individual case.
What if you have more than one withholding tax number?
A grant is awarded in respect of each withholding tax number (loonheffingsnummer in Dutch). If you have more than one withholding tax number and you wish to apply for support for your entire wage bill, you will need to make a separate grant application for each number. Please note, though, that in each case you will need to specify the decline in turnover as it applies to the business as a whole. In other words, you should quote the same figure for the decline in turnover and the same reference period in each application.
Can you also apply for a grant for the period after 1 June 2020?
The government has given itself the option of extending this emergency measure by a further three months. It has said that it will decide by 1 June at the latest whether the scheme is indeed to be extended.
How much time does the UWV have to inform you whether you qualify for a provisional grant?
The UWV is required to make a decision within 13 weeks of the date on which it receives your application, provided that it contains all the information it needs in order to make a decision. However, the UWV does its best to make sure that the provisional grant is paid within a period of 2-4 weeks. The provisional grant is disbursed in three instalments.
What’s the procedure once you have received a provisional grant?
You must submit a formal application for assessment of the final value of the grant within 24 weeks of the end of the period in which there was a decline in your turnover. There is a special form that you can use for this purpose. The UWV sets the final value of the grant within 52 weeks of the date on which it receives your application.
What if you’ve already been given permission to put your staff on short-time working?
If you are already making use of the short-time working scheme, you cannot apply for an extension of the period in question . What you can do is to apply for a grant under the NOW scheme. If there is then a degree of overlap between an NOW grant and the payment of unemployment benefits under the short-time working scheme, the unemployment benefits will be deducted from your wage bill for March, April and May for the purpose of calculating the final value of the grant. This is intended to prevent any double payment of government grants.
Like to find out more about the NOW scheme?
Whether you’d like further details about the scheme or whether you have any other queries about the legal aspects of the coronavirus crisis in relation to your business and your staff, please don’t hesitate to contact me or one of my colleagues from our employment law practice. You can also put your questions to the specialist staff at our Coronavirus Help Desk. We’ll be only too glad to help.