Businesses have by now found their way to the Temporary Emergency Bridging Measure for Sustained Employment (NOW). This subsidy scheme to compensate for wage costs was extended as of 1 June 2020. After the official announcement of the extension, there have still been numerous updates and changes, the implications of which are not always entirely clear. We can imagine that entrepreneurs can no longer see the wood for the trees. That is a shame, because without a good understanding, an optimal application and compliance with the subsidy conditions is very difficult. That is why below we list the most important changes and updates of the NOW 2.0 compared to the NOW 1.0.
Incidentally, the exact NOW 2.0 scheme itself has still not been published, which makes it difficult to explore some topics in precise detail. All the information below has been drawn from letters to parliament, our own background information, and experience with the NOW 1.0.
Explanation of NOW 2.0.
Under the NOW 2.0, the wage costs for the months of June, July, August and September will now also be eligible for a contribution. Companies can therefore have part of their wage costs compensated by the government for a further 4 months, provided they meet the subsidy conditions. This NOW 2.0 subsidy can only be applied for at the UWV from 6 July 2020. In addition, at least 20% of turnover (compared to 2019) must still have been lost.
The turnover decline that is relevant here must be calculated over a period of 4 months, starting on 1 June, 1 July or 1 August 2020. An important new condition is that the NOW 2.0 period must connect exactly to the NOW 1.0 period, if that was also applied for.
Change to the dismissal penalty.
Instead of the dismissal penalty of 150% of the salary, which is deducted from the subsidy in the event of a dismissal application to the UWV during the NOW period, under the NOW 2.0 there is a correction of only 100%. Companies that get into trouble must be given room to already be able to reorganise in the second NOW period, according to Minister Koolmees. If an employer making use of the NOW 2.0 applies for a business-economic dismissal during this period, the subsidy is corrected upon determination by 100% of the maximum reimbursable wage sum of this employee (in the reference month), increased by the flat-rate surcharge (40%) over 3(!) months. Oddly, the formula for this reduction is therefore: employee’s wage X 3 X 1.4 X 0.9. This while the NOW 2.0 period concerns 4 months and not 3.
A 100% deduction can still turn out unfavourably.
Regarding Minister Koolmees’s statement, I would note that this 100% is still a considerable sanction. This still amounts to a penalty. Below are two calculation examples that illustrate this:
Calculation example 1: Situation with a 100% turnover decline.
A company with 3 employees, each with a wage sum of €1,000 per month, suffers a turnover decline of 100%. The company submits a subsidy application for the NOW 2.0 scheme.
The subsidy must be calculated as follows:
100% (turnover decline) X 90% (subsidy percentage) X €3,000 (total wage sum for March) X 4 (months) X 140% (flat-rate surcharge) = €15,120.
That amounts to (100% X 90% X €1,000 X 4 X 140% =) €5,040 subsidy per employee.
To save costs in the long term, 1 employee is given a business-economic dismissal. This works out as follows:
€1,000 (individual wage sum) X 3 (months) X 1.4 (flat-rate surcharge) X 0.9 (subsidy percentage) = €3,780
This amount must be deducted from the subsidy. €15,120 – €3,780 = €11,340. In other words, 25% less.
The employer is therefore, at the end of the day, still left with (€5,040 – €3,780 =) €1,260 in subsidy for this employee.
Calculation example 2: Situation with a 50% turnover decline.
The same company now suffers a turnover decline of 50%. The company again submits a subsidy application for the NOW 2.0 scheme. The subsidy must now be calculated as follows:
50% (turnover decline) X 90% (subsidy percentage) X €3,000 (total wage sum for March) X 4 (months) X 140% (flat-rate surcharge) = €7,560.
That amounts to (50% X 90% X 1,000 X 4 X 140%) = €2,520 subsidy per employee.
Here too, 1 employee is given a business-economic dismissal. The subsidy is then corrected upon determination by 100% of the wage sum of the employees for whom dismissal has been applied for. This works out as follows:
€1,000 (individual wage sum) X 3 (months) X 1.4 (flat-rate surcharge) X 0.9 (subsidy percentage) = €3,780. Here it is clear that no account is taken of the turnover decline percentage.
€7,560 – €3,780 = €3,780. That is the amount that remains of the total subsidy.
The dismissed employee would initially generate a subsidy of €2,520, but this is thus reduced by €3,780, resulting ultimately in a penalty of €1,260.
The final subsidy cannot become negative. If there had only been 1 employee here, the final subsidy determination could not have been reduced by more than €2,520.
Mandatory consultation with trade unions.
If the employer wants to dismiss more than 20 people, mandatory consultation with the trade unions must also take place. Broadly, to discuss whether that dismissal is necessary and under what severance conditions (social plan) it will take place. Companies can have their subsidy reduced by 5% if this does not happen.
NOW application and UWV dismissal application.
Note that a NOW subsidy still plays a role in the assessment of the dismissal application. When assessing the dismissal application, the UWV will always look at other measures the employer has taken or could have taken to prevent the dismissal. If, for example, someone did not apply for NOW despite a drastic turnover decline, but proceeded directly to dismissal, the UWV can be difficult about that. A NOW application might perhaps have prevented that. If a NOW application has indeed been made, it is of course advisable to demonstrate, with figures, that the dismissal, despite the NOW subsidy, is unavoidable.
Change to the wage-cost reference month.
Instead of January 2020, March 2020 is now taken as the reference month for wage costs. For many sectors this works out more favourably, because the winter months are traditionally quieter and wage costs in January 2020 are usually lower than in March 2020. Also, if you have taken on more people after January 2020, the higher wage sum of March 2020 will therefore be taken into account for the subsidy.
For the NOW 1.0 application, incidentally, the month of March 2020 can still be taken as the starting point in the application for the determination of the subsidy (application can only be made after 7 September 2020) if that works out more favourably. This is possible if the average monthly wage sum in the months March through May is higher than in January 2020. The employer may therefore possibly still receive more subsidy than expected. So don’t forget to check (or have checked) this when applying for the subsidy determination in September 2020.
Higher factor for employer costs.
The surcharge percentage for employer costs is increased from 30% to 40% under the NOW 2.0, because 30% did not adequately cover the costs in most cases anyway. This now also provides a contribution towards costs other than wage costs, such as the fixed overhead costs surrounding employees. The formula for calculating the amount of the subsidy then becomes:
(wage costs for March 2020 X 3 months) X 40% (employer-cost surcharge percentage) X (turnover decline percentage) X 90%. The advance payment is 80% of this total amount.
Exception for a loss-making operating company within a group.
Does the group as a whole not suffer more than 20% turnover loss, but does an individual operating company? Initially, no NOW subsidy could be applied for in that case, but this has since been adjusted for both the NOW 1.0 and the NOW 2.0. A loss-making operating company can indeed submit a NOW application, but under additional conditions:
- The group must then declare that it will not pay out dividends, pay out bonuses, or buy back its own shares over 2020.
- In addition, agreement is needed with the trade union on job preservation, or, for operating companies with fewer than twenty employees, a representation of employees.
- Additional requirements will also apply, to be assessed by the accountant. This will only become known once the NOW 2.0 scheme is published.
No dividend distributions on 2020 profits.
Companies making use of the NOW 2.0 may not pay out any dividend at all to shareholders on the profits of 2020, and may not distribute any bonuses to the board and management. In addition, the buyback of own shares over 2020 is also prohibited. Through the buyback of own shares, the company would then have to pay out the value of those shares to the shareholders. That can also be a disguised form of profit distribution.
Accountant’s and third-party statements regarding turnover decline.
For both the NOW 1.0 and the NOW 2.0, an accountant’s statement is required in some cases regarding the stated turnover decline percentage. This is needed when the advance received will amount to more than 100,000 euros, which can be calculated when applying for the advance. The statement is also needed when the final subsidy amount, to be determined and applied for at the end of the NOW period, on the basis of actual turnover, comes to more than 125,000 euros. This latter threshold has been added to prevent an applicant from initially receiving an advance below 100,000 euros, and therefore not having to submit a statement, but then turning out to have a final subsidy that is considerably higher.
Online tool for calculating the accountant’s-statement threshold.
This means that companies that have received less than €100,000 in advance must make their own estimate of whether the final subsidy will be equal to or higher than €125,000. To make this estimate somewhat easier, the government will make an online tool available on the basis of which it can be calculated how high the subsidy will turn out to be.
Timeline for applying for the subsidy determination and the accountant’s statement.
The subsidy determination can only be applied for from 7 September 2020. The application must in principle be made within a period of 38 weeks after the end of the chosen turnover period, for applications for which an accountant’s statement is required. Without a statement, that is 24 weeks. This is to prevent a peak workload for accountants as much as possible. By extending the application period, the accountant’s statement for the NOW can often also be combined with the regular annual accounts audit, which is more efficient and effective. Exactly what the accountant’s statement should look like will be announced before 1 August 2020.
Threshold for the third-party statement.
When a company does not need an accountant’s statement but does receive a final subsidy that is higher than €25,000, a third-party statement is still needed. In this case, that can be a statement from an accounting firm, financial service provider or adviser of a trade association. They can indicate whether the stated turnover decline has been calculated consistently.
No statement, but still a check.
Only below €25,000 is no subsequent check required, and therefore no third-party statement needs to be submitted either. This does not mean, however, that no check takes place by the Ministry. The employer is responsible for all information they have provided. With regard to turnover and the wage sum, the employer must maintain sufficiently verifiable records so that it can be checked afterwards whether a subsidy was rightly granted. The employer also has the obligation to report immediately if it becomes clear that they no longer meet the requirements for granting the subsidy. For example, if the turnover decline turns out (virtually) not to occur after all, due to a windfall.
Filtering of incidental wage costs.
The much-criticised ‘blunt’ nature of the scheme has been somewhat refined. Employers who had a relatively high wage sum in January 2020 (for example due to paying out a 13th month) would be unfairly ‘punished’ by the lower wage sums in March, April and May 2020 during the NOW period. It has been announced that these employers will nevertheless not be disadvantaged by this in the final determination of the wage subsidy. The UWV will disregard these payments.
Other support measures count as turnover.
Small and medium-sized enterprises that, in addition to wage support, receive assistance with their fixed costs via the TOGS and TVL, must count that subsidy as turnover in the NOW application.
Foreign bank account numbers.
For all support measures, a Dutch bank account number was required. The minister has reversed this. A SEPA bank account number is sufficient. There are a lot of foreign companies that have registered their company as a Dutch branch with the Chamber of Commerce and pay Dutch staff from a foreign account number. In practice, this still proves to be quite difficult to process quickly and consistently at the UWV, because staff there also do not yet fully understand everything.
In any case, a special form must be requested by post from the UWV, and it must also be sent back by post. Post.nl often also does not work in the entrepreneur’s favour in this respect, because mail items to and from the UWV regularly either do not arrive at all or only arrive weeks later. We therefore advise sending everything by registered post and also noting down names when you call the UWV to check whether they have already received the form. If it gets stuck within the UWV organisation, we advise filing an official complaint. Suddenly, files can then be emailed back and forth using a special mail program, Zivver. We now have extensive experience with this, and it is really a matter of staying on top of it. You can always ask us for help if you get stuck. Perhaps even safer, have us handle the NOW application for you.
NOW services.
In the first round, we were able to help many companies. Both with their NOW subsidy application and with advice regarding dismissal options. Thanks to this experience, we can also now expertly assist you in achieving the best result for the business. You can schedule a NOW advisory session with us directly online. For example, if you are still unsure whether a new NOW application is the best choice, or if you are unsure whether the business can meet the new conditions. Of course, you can also have a NOW application fully handled by us if you are certain that the business can meet all the conditions. Click here for more information about these services.
The entrepreneur may also be considering other measures, such as a reorganisation. We also have a lot of experience with that and are happy to advise you on it.
Questions and/or advice?
The corporate legal advisers of The Legal Company specialise in employment law, contract law and corporate law for SMEs. Should you have questions following the above, or would like legal advice or support? Then please contact us by filling out this contact form or calling us on: 020-3450152.
Nothing changes as much as laws and regulations. We would like to point out that our blogs may no longer align with current laws and regulations and may therefore be outdated. If you have questions or a problem relating to this blog, or wish to obtain legal assistance, please contact us.
