State Aid: Second tranche of the Emergency Bridge Fund for Employment (NOW 2.0) explained
The first version of the Emergency Bridge Fund for Employment (Noodmaatregel Overbrugging Werkgelegenheid or “NOW”) was announced on 31 March 2020 and runs until 31 May 2020. NOW aims to provide financial assistance to employers suffering from an acute and significant drop in revenue through partial coverage of wage costs. The possibility to add further conditions to the scheme in the event of extension of the aid package was left open. In a letter dated 20 May 2020, Parliament was in-formed of the conditions for the second tranche (NOW 2.0). The full content of NOW 2.0 has been presented in a regulation of 22 June 2020.
Click here to see an overview of the differences between NOW and NOW 2.0.
- NOW has been extended in order to continue to support employers facing an acute and significant drop in revenue (i.e. more than 20%).
- Support takes the form of partial coverage of the employer’s wage costs for the period of June up until September 2020 and is proportionate to the decrease in revenue.
- The goal of NOW 2.0 is to enable employers to retain employees and make them jointly responsible for preserving employment in the Netherlands.
- Financial assistance is available for all employers, both those applying for NOW for the first time and those that submitted an application for the initial period (March through May 2020).
- The eligibility criteria for NOW 2.0 remain basically the same. The employer must expect a decrease in revenue of at least 20% over four consecutive calendar months, this time starting on 1 June 2020, 1 July 2020 or 1 August 2020. For employers reapplying for NOW, the turnover period under NOW 2.0 must be consistent with the turnover period selected for the first period.
- An application for NOW 2.0 can be submitted from 6 July 2020 until 31 August 2020. In order to avoid overlap in the application and approval process, the final determination for the first period can be requested as from 7 September 2020. The final determination of the second period can be request-ed as from 15 November 2020.
- The application must meet the criteria laid down in the NOW 2.0 regulation.
- An employer is still expected not to dismiss employees (i.e. submitting a request to the Employee Insurance Agency for a dismissal authorisation based on economic reasons) but the fine on dismissals as was under the initial NOW the case has been waived under NOW 2.0.. In other words, the final amount of financial assistance under NOW 2.0 will be adjusted downward by 100% of the dis-missed employee's wage cost rather than 150%, as was previously the case. This applies to requests for a dismissal authorisation filed in the period from 1 up until 30 September 2020. However, a fine of 5% of the total compensation received will be imposed if an employer dismisses at least 20 employees without prior consultation of the trade unions.
- The employer has a best-efforts obligation to keep the wage cost at the same level and to continue to pay the employees their salaries.
- The employer has a best-efforts obligation to encourage employees to undertake further training or retraining, for example by freeing up the necessary time and resources to this end, e.g. through an R&D fund. In addition, the government is working on an accompanying crisis package “Netherlands continuing education” (NL leert door), which is intended to enter into force in July 2020.
- Employers must agree to abide by the following restrictions until after the 2021 annual general meeting at which the 2020 financial statements are approved:
- no payment of bonuses (from profits or otherwise) to management and directors;
- no payment of dividends or repurchase of own shares (except in the case of bonuses, dividends or share repurchases relating to 2019).
This obligation only applies to companies receiving financial assistance for which an auditor's report is required. Parliament will be informed shortly of the applicable threshold.
- The employer is obliged to inform the works council or employee representative body or, in the ab-sence thereof, the employees themselves of the fact that financial assistance has been granted. Prior consultation is not required.
Calculation of the decrease in revenue
The decrease in revenue is established by dividing the difference between the reference revenue and the projected revenue over the period for which financial assistance is requested by the reference revenue. The result is expressed as a percentage, rounded up to the nearest whole number.
- The reference revenue is equal to the revenue generated in calendar year 2019, divided by three (an alternative calculation method is available for employers that were not active for the entire calendar year).
- Revenue is established per legal entity, unless the entity forms part of a group, in which case the decrease in revenue for the group is decisive.
- Subsidies and other funds from public sources are treated as revenue.
NOW has been modified several times in response to sticking points experienced in practice. Two important examples are (i) the application of the scheme to group companies and (ii) seasonal work. Both of these issues recur under NOW 2.0..
- NOW was amended with effect from 4 May 2020 with regard to its application to group companies. If the decrease in revenue is less than 20% at group level but 20% or more at the level of an individual operating company, the operating company can apply for NOW. However, several conditions must be met, including a prohibition on the group paying bonuses or dividends for 2020 or repurchasing its own shares.
- A number of measures have been taken to accommodate companies facing seasonal peaks. If the company's wage cost from March through May exceeds three times the January wage cost, the March through May wage cost is used as the starting point to calculate the amount of financial assistance, with the wage cost for April and May capped at the March wage cost. In addition, under NOW 2.0, the reference month to determine the wage cost is March rather than January 2020.
Calculation of the financial assistance
The amount of financial assistance under NOW 2.0 is calculated on the basis of the formula A x B x 4 x 1.4 x 0.9 where
- A is the percentage decrease in revenue as set out above.
- B is the total wage cost for employees whose wages the employer paid in March 2020 (with a maxi-mum cap of EUR 9,538 per employee). In certain situations, the total wage cost is adjusted down-ward (e.g. if the employer has applied for a dismissal authorisation).
- the number 4 reflects that the financial assistance is granted for 4 months, whereas the factor B is based on a one-month period.
- the number 1.4 (1.3 under NOW 1.0) is a fixed multiplier, to factor in the employer's additional costs (e.g. holiday allowance, pension and employer's social security contributions, etc.).
- the number 0.9 reflects that 90% of the wage cost – in proportion to the percentage decrease in revenue – is covered by the government.
Applications must be submitted online, using the form posted on the Employee Insurance Agency's website. Applications must include the following information:
- the expected percentage decrease in revenue
- the consecutive four-month period, in the period from 1 June to 30 November 2020, in which the decrease is expected;
- the employer’s payroll tax number;
- the account number to which the employer receives payments from the Dutch tax authorities in relation to payroll tax.
The Employee Insurance Agency will take a decision within 13 weeks from receipt of a complete applica-tion. The employer will receive an advance payment of 80% of the financial assistance, paid in two instalments. In practice, we have seen that the advance is paid much faster, sometimes within a week from submission of an application
Ex post assessment
The employer will have to apply for a final determination of the amount of financial assistance within 24 weeks after 15 November – or within 24 weeks after the end of the granted period if it continues until after 15 November. When requesting a final determination, the employer will most likely have to pro-vide inter alia:
- a final statement of the decrease in revenue, supported by substantiating documentation and in-formation;
- an audit opinion (unless the advance payment received is lower than EUR 100,000 and the definitive amount of subsidy is lower than EUR 125,000); and
- a statement by the employer confirming compliance with the obligations mentioned in the government regulations.
The final amount of financial assistance will be determined upon receipt of the abovementioned information. The 80% advance payment will be set off against the final amount.
Financial assistance can be revoked or recovered, in whole or in part, if it is established that:
- financial assistance should not have been granted;
- the level of financial assistance granted was too high (which could be the case if wage costs are lower(ed) as a result of employee turnover, for instance if fixed-term contracts are not renewed);
- the requirements set out in the government regulations were not complied with; or
- the employer – during or after the period covered by the financial assistance – is deemed, due to acts or omissions on its part, not to have complied with the purpose of NOW.
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