On October 9, the Dutch government published the extension of the Temporary Emergency Measure, effective from October 10, 2020 (the “Extended Scheme”). This note informs you about the main principles of the Extended Scheme, which are the following:
- The Extended Scheme provides for three compensation periods:
- NOW 3.1. A third period running from October 1, 2020, up to and including December 31, 2020; applications can be submitted retroactively from November 16, 2020, but before December 14, 2020;
- NOW 3.2. A fourth period running from January 1, 2021, up to and including March 31, 2021; applications can be submitted from February 15, 2021, but before March 15, 2021.
- NOW 3.3. A fifth period running from April 1, 2021 up to and including June 30, 2021; applications can be submitted from May 17, 2021 but before June 14, 2021.
- The process and conditions remain the same under the Extended Scheme. The Extended Scheme provides for compensation for wage costs. The amount of the compensation is determined on the basis of the wage amount and the drop in turnover. The method for calculating the compensation remains the same under NOW 1 and NOW 2: comparing a quarter of the turnover achieved in 2019 (e.g. the full year figure divided by four) with the turnover in the applicable period as set forth below.
- Employers are eligible for the compensation if they expect to lose at least 20% of their turnover in the third period. If an application has been made under the NOW 2 scheme and an application will again be made under the Extended Scheme, the loss of turnover must relate to the period immediately following the period referred to in the application under the NOW 2 scheme.
- However, under the Extended Scheme the minimum loss of turnover to be eligible for compensation goes up. In NOW 3.1, the required minimum loss of turnover is still 20%, but in NOW 3.2 and NOW 3.3 it goes up to 30%.
- Another change compared to the NOW 2 scheme under the Extended Scheme is that the maximum percentage of wage costs to be reimbursed at 100% loss of turnover will be gradually reduced from 90% in NOW 1.0 and 2.0 to 80% in the NOW 3.1, 70% in NOW 3.2 and 60% in NOW 3.3.
- The reference month for the wage bill for each of the three periods is June 2020.
- The maximum salary amount to be eligible for compensation in NOW 3.3 is reduced from twice the maximum statutory daily wage (€9,691 per month) to once the maximum daily wage (€4,845 per month).
- Loss of turnover is still determined at a group level: this concerns Dutch legal entities and companies, as well as foreign legal entities and companies with wages in the Netherlands.
- If a group has a decrease in turnover of less than 20% in NOW 3.1 and 30% in NOW 3.2 and 3.3, but an individual Dutch company has a decrease in turnover of 20%, respectively 30%, that company may apply for a compensation, subject to conditions with regard to dividend and bonus as set out below.
- Employers may apply for dismissal with the Dutch Labor Office due to business economic reasons during the period in which they receive compensation. There are no longer restrictions in this respect as the case was under NOW 1 and NOW 2.
- Under the Extended Scheme, employers are no longer required to confirm as part of their application that they will consult with unions if they want to make 20 or more employees redundant. The compensation will no longer be reduced by 5% in this respect. The obligations to consult the unions under the Collective Dismissal Act in case of 20 dismissals or more remain in place.
- Furthermore, NOW 3 removes the obligation to keep the wage sum as equal as possible during the compensation period. NOW 3 offers the possibility to reduce part of the wage bill during the compensation period without this having a direct effect on the amount of the compensation. This exempted percentage increases from 10% of the wage sum in NOW 3.1, to 15% in NOW 3.2d and 20% in NOW 3.3. Existing legal requirements regarding unilateral amendment of employment conditions, such as amendments to the wage, remain in force.
- A legal entity that applies for NOW 3 this year may still not make profit distributions to shareholders, may not pay bonuses to the board and executives/directors and other policymakers of that entity and the group and may not repurchase its own shares over the year 2020 under NOW 3.1 and 2021 under NOW 3.2 and 3.3. This restriction under the Extended Scheme applies to companies and groups of companies that receive in total for the period a deposit payment of at least €100,000 or a definitive facility for the total tranche of €125,000 or more, in which case also a statement of the accountant must be enclosed with the request for final assessment of the compensation. Specific rules apply to companies with a split financial year.
- It has been provided explicitly that the bonus and dividend restrictions under NOW 1, 2 and 3 apply irrespective the moment of payment/repurchase. Such also to avoid such payments over 2020 after the adoption of the yearly accounts in 2021.
- The Extended Scheme introduces an obligation for employers to guide employees whose position will be made redundant to new work. Employers who apply to dismiss employees for business economic reasons are required to contact the Dutch Labor Agency by telephone. If they fail to do so, the compensation amount will be reduced by 5%. We can provide you with further details for the specific situation.
- The entitlement to the compensation is set at zero if the company/group does not meet the requirements for this application or does not fulfil its obligations under the Extended Act.
If the requirement of decreased turnover of 20% for the third period or 30% for the fourth or fifth periods is not met at the Netherlands group level, but is met by an individual legal entity in the Netherlands group, the individual entity may still be eligible to claim scheme relief on that basis if, among other things, the following additional (and stricter) requirements are met, which –for the majority- also already applied under NOW 2.0:
- The company, the group and the parent company may not make profit distributions to shareholders, may not pay bonuses to the board and executives/directors and legal entities in the group, and may not repurchase its own shares over the year 2020 under NOW 3.1, and over the year 2021 under NOW 3.2 and 3.3. This restriction applies irrespective the moment of payment and the amount of compensation applied for or received and applies not only to the applying entity in view of the assumed group solidarity. The ultimate holding company, the group holding company and parent company will have to provide a statement that the group will comply with this restriction for each period. What has been changed is that the statement of an accountant confirming that the legal requirements for the application have been and will be me, is no longer required to go with the application but must be added to the request for final assessment of the compensation The scope of the term “group” in the Scheme is not clearly defined and should, according to the explanation of the Scheme, be reviewed also on the basis of accounting principles.
Please note that the above is a general outline only and does not constitute specific advice. We recommend carefully reviewing and considering the requirements in case of applications under the Extended Scheme for a specific company or group, particularly because the regulations are not only worked out in more detail than set out above, but are also amended from time to time. In addition to consulting Dentons, in light of the accounting aspects we strongly recommend involving your accountant in good time.
Please feel free to reach out to us if you have any questions. We will keep you updated in the event of new developments and will invite you to participate in a client webinar shortly.
- Decrease of less than 20%/30% of the turnover (Article 6 of the Extended Scheme) ↩