The NOW (Temporary Emergency Bridging Measure for Sustained Employment) scheme replaces the withdrawn Short-Time Working Scheme. Entrepreneurs can apply for a NOW contribution of up to 90% of wage costs to cushion the decline in revenue and unemployment!

This scheme is better because it directly cushions the economic damage caused by the coronavirus. So what are the most important questions surrounding the transition from the WTV to the NOW scheme?

Why has the old scheme been stopped?
Simply put, because the new scheme is much better tailored to the mass application volume and the decline in revenue that needs to be compensated for directly, in the form of wage cost compensation. The old scheme was only intended for reduced working hours due to unworkable weather and was geared towards around 200 applications per year, not 78,000 or more! Moreover, the Ministry of Social Affairs and Employment (SZW) is not equipped to process all those applications, which is why it now goes to the UWV. They are used to working with unemployment-benefit and dismissal applications and simply have more staff.

Do existing short-time working permits remain valid?
Existing short-time working permits remain valid; any extensions run via the new NOW. Applications already submitted on which no decision has yet been made will be treated as applications for the new NOW. The additional information needed to decide on your application in accordance with the NOW will be requested shortly.

What are the most important conditions of the NOW?

1. Entrepreneurs above a certain revenue threshold will have to demonstrate the decline in revenue by means of an auditor’s statement, so that it gives a more reliable picture of the expected decline in revenue and the wage compensation to be advanced by the UWV.
   
   
2. This explicitly concerns decline in revenue and not employees who can no longer carry out their duties or whose duties have become void of content. So you do not have to tell employees that their working hours have been reduced and that they are therefore partly unemployed. They are not. An employee who no longer has work because an assignment has fallen away is therefore not partly unemployed. He remains on call for those hours and can simply be deployed by you in another way. This allows you to organise the work in the way that best suits your company and your staff and still offers the best chance of revenue;
   
   
3. You do not receive wage compensation if revenue has declined by less than 20%. That is essentially different from the old scheme, which was hours-related. You are expected to be able to keep paying your fixed costs at a decline in revenue of less than 20%. The question now is whether that works out fairly. At a 19% decline in revenue, some companies may also no longer be able to pay their fixed costs, and these could go under if there is no wage compensation;
   
   
4. As an employer, you must continue paying 100% of the wage, even in the case where you get 90% of the wage compensated. This instead of at least 75%-70% of the unemployment benefit for the lost work;
   
   
5. The UWV pays out an advance amounting to 80% of the expected wage cost contribution. It is later corrected, if necessary, based on the actual decline in revenue;
   
   
6. Under the NOW, compensation can also be requested for employees with a flexible-hours contract, think of zero-hours contracts, min-max contracts, on-call contracts;
   
   
7. Secondment agencies (the final scheme for payroll companies and staffing agencies is still unclear) can also apply for a wage cost compensation for temporary workers employed by them;
   
   
8. The period of the contribution is not 6 weeks but 3 months. This can be extended by another 3 months, possibly under different conditions;
   
   
9. Afterwards, the Tax and Customs Administration will check the decline in revenue, as substantiated by the auditor’s statement or by the applicant themselves. If the employer has a smaller decline in revenue than stated in the application, they will have to repay wage compensation. If there is a bigger decline in revenue, the employer receives a supplementary payment;
   
   
10. The contribution does not take effect only from the day of application, but applies, depending on the reduced revenue, from 1 March 2020;
    
    
11. Last but not least: The employer may not submit an application for economic dismissal during the period of the contribution. Dismissal applications already submitted remain valid.

Calculation examples of the amount of NOW compensation.

Wage compensation is not an end in itself; keeping revenue on track remains the priority!
Revenue is always better than a wage cost compensation that only covers part of your wage costs, but not the rest of your overheads. As an entrepreneur, you may find yourself, in these times, dealing with clients who want to save on their own costs and therefore want to temporarily ‘pause’ your contract. Don’t think, “I’ll get wage compensation anyway, so let me just go along with the client’s wish to fully halt the assignment (as well as sending invoices), even though that’s because of the coronavirus.” After all, the coronavirus does not, in most cases, justify an appeal to force majeure.

The supplier will therefore have to keep demanding performance and keep sending the usual invoices. After all, revenue is preferable to wage cost compensation, since the latter is only partly cost-covering for personnel. There are, however, still a lot of other bills to pay, such as rent, telephony, gas, water and electricity, lease cars, etc. This, in turn, means no decline in revenue becomes visible, which is in principle measured in advance based on the expected invoices. An expected substantially higher (doubtful) accounts-receivable balance does not produce a decline in revenue. How is an accountant going to make a statement about this in the application, to ensure the Tax and Customs Administration does not later raise objections?

Creditor’s default and force majeure
Not taking, or taking a reduced amount of, the services/products agreed with you for a certain duration, and as a result not paying the invoices, is regarded as creditor’s default. This constitutes an attributable failure in the performance of the agreement (i.e. breach of contract), provided you do indicate that you remain available to perform your agreed service.

The client can only justify its creditor’s default with a successful appeal to force majeure. At the moment, many clients think the coronavirus constitutes such force majeure. That appeal will certainly not succeed in every case. Force majeure in the statutory sense means a relative or permanent impossibility of performance. In the case of relative impossibility, it is still physically possible for the client to perform, but it may be disadvantageous for them because no revenue is being generated. However, your client can simply apply for wage compensation for that instead of shifting it onto you. Fulfilling a cleaning contract, for example, is still possible. An appeal to force majeure by the client will not work in such a case. It is then advisable to point out the client’s obligations, keep sending invoices, and build a file around the unilateral contract changes.

Unforeseen circumstances
If the client cannot invoke a force majeure clause, invoking unforeseen circumstances is its last option to force a unilateral change to the cleaning agreement with you because of the coronavirus. This appeal is possible if the corona crisis arose after the moment the ongoing agreements were concluded. Your client could not have taken that into account when entering into a long-term obligation with you. Of course, for new contracts you conclude now, this is certainly not the case.

For such an appeal to succeed, the effects of the coronavirus must be so drastic for your client’s business that, according to standards of reasonableness and fairness, an unchanged continuation cannot be asked of your client. Of course, that again depends on the specific facts of the case.

In general, in disaster-like situations such as this, some change can indeed be demanded, but that will first have to take place based on agreement, at the initiative of your client, since they are the one wishing for a change. Failing that, the client will really have to go to court to force that change. And then it can be argued that the client, even in these corona times, still has an interest in the agreed performance.

PS. The agreed contract terms (general terms and conditions) may have deviated from the statutory scheme regarding force majeure. This must be examined on a case-by-case basis.

Our advice:

Have you been confronted with a unilateral halting or amendment of the contract without any form of consultation? Give a written response stating you do not agree with this, and send a demand and default notice letter and invite your client for consultation. Let us assess your contractual position and draft the letter.

Am I still entitled to a NOW contribution if I simply let my client breach the contract?

The Tax and Customs Administration will later check what the actual decline in revenue was. If you did bring in the revenue and there is a smaller decline in revenue, you simply repay any wage cost compensation you received in excess. However, if you have credited invoices unquestioningly, without any resistance or breach-of-contract file, you run the risk that the Tax and Customs Administration will withdraw the wage compensation for that portion of the credited revenue. This could be regarded as manipulation of revenue. A breach-of-contract file provides sufficient justification for your crediting if it comes about after resistance and joint consultation with the client. Then you can also demonstrate that you did everything you could to preserve your revenue and that you only credited the portion which you reasonably felt should be for your own account and risk. Doing nothing against a breach of contract could therefore result in forfeiting the right to wage compensation!

Questions or advice?
The Legal Company, employment law experts, specialise in employment law for SMEs. If, in light of the above, you have any questions or would like legal advice, please contact us by filling in this contact form.

Nothing changes as often as laws and regulations. We would like to point out that our blogs may no longer be in line with current laws and regulations and may therefore be outdated. If you have questions or a problem relating to this blog, or if you require legal assistance, please contact us.