Coronavirus - Emergency bridging for work retention in the Netherlands

As explained in our last insight, published on 18 March 2020, the Dutch government embarked upon exceptional economic measures with the aim of maintaining jobs and income during the COVID-19 pandemic.

One of these measures is the Temporary Emergency Bridging Measure for Work Retention (EBM) and on 31 March 2020, the Minister of Social Affairs and Employment outlined further details as below:

Purpose of the EBM

In short, the aim of the EBM is to support employers, in these times of acute and severe decline in turnover, by subsidising wage costs. The purpose is to keep their employees employed as much as possible.

Application period EBM

The government (the UWV) is aiming to implement this scheme from 6 April 2020 (this will be decided upon on 03 April).

The EBM application period will run from 14 April until 31 May 2020, or as early as possible (6 April 2020). Before 1 June 2020, a decision will be taken as to whether the application period (and subsidy) will be extended for three months and under which conditions.

If an employer has more than one payroll tax number, the employer must submit a separate application for each separate payroll tax number. For each request, however, the employer must indicate the same decrease in turnover (the decrease in turnover expected for the entire company over the Measuring period (as defined below)).

Subsidy for labour costs March to May 2020

The final subsidy provides for a subsidy of up to 90% of the wage sum for the three-month period March, April and May 2020. However, the advance subsidy will be based on the wage sum of January 2020.

The wage sum is based on the social security wage from current employment, plus a general surcharge for employer charges of 30% (for all cases). The wage per individual employee taken into account is capped at twice the maximum daily wage. In short, the individual salary above €9,538 gross per month does not qualify for subsidy.

Subsidy related to decrease in turnover

In addition to the wage sum, the amount of the subsidy depends on the percentage of the decrease in turnover. The percentage of 90% of the wage sum is a maximum percentage that will be paid out in the event of a fall in turnover of 100%. If the fall in turnover is lower, the subsidy will also be set at a lower percentage. As explained in our last Insight, the relationship between the reduced turnover and the amount of the subsidy can be explained using the examples below:

• if 100% of the turnover is lost, the subsidy amounts to 90% of the wage sum of an employer;
• if 50% of the turnover is lost, the subsidy amounts to 45% of the wage sum of an employer;
• if 25% of the turnover is lost, the subsidy amounts to 22.5% of the employer's wage bill.

In order to qualify for the EBM, the expected decrease in turnover must be at least 20% over a three-month period (the "Measuring Period"). The starting date of the Measuring Period must fall on the first day of the month of March, April or May 2020. The turnover in the Measuring Period is then compared to the total turnover of January through December 2019, divided by four. If the employingcompany did not exist on 1 January 2019, a different turnover provision applies.

In principle, if a group of companies is involved, the decrease in turnover at group level will apply. If a group as a whole loses less than 20% of its turnover, no compensation will be paid to individual parts of that group that are still inactive. In the case of foreign group entities (not established in the Netherlands and no tax and/or social security contributions are paid in the Netherlands in respect of the wages), the turnover of these foreign group entities is not included in the calculation of the decrease in turnover.

Advance subsidy

After a positive decision on the application, the UWV will grant an advance subsidy of 80% of the expected subsidy (based on the wage sum of January 2020 and the expected decrease in turnover over the Measuring Period).

The UWV must decide on the complete application within 13 weeks of receipt and the advance payment will be made in three instalments. The aim is to have the first instalment paid within two to four weeks.

Determination of the final subsidy

Within 24 weeks after the end of the period for which the EBM has been granted, the employer must apply for a determination of the final subsidy. In principle, an auditor's report is required.

Within 22 weeks after receipt of this application, the UWV will determine the final subsidy. The settlement may involve a subsequent payment or - if, for example, the loss of turnover and/or the wage sum is lower - a recovery.

In addition, various conditions and obligations have been imposed on employers participating in the EBM. The most important are set out below.

• Obligation to keep the wage sum as equal as possible

  The employer is obliged to make an effort to keep the wage sum as equal (to the wage in the reference month January 2020) as possible and thus continue to pay to employees. If, despite this, fewer employees continue to be paid or if the amount of the wage sum is adjusted downwards, the contribution to the wage costs also decreases.

  In principle, the advance is based on the wage sum for the January 2020 period. If the wage sum for the months of March, April and May 2020 is lower, the amount of the final subsidy will be reduced by 90% of the amount by which the wage sum fell. For eg:

  In the event of a 100% fall in turnover

  • the advance is based on a wage sum of € 200,000 (January 2020);
  • the expected final subsidy is then € 200,000 x 90% = € 180,000;
  • of which 80% is paid as an advance payment = € 144,000;
  • the wage sum for the months March, April, May 2020 is ultimately € 110,000;
  • the reduction in the wage sum, times 90%, is deducted from the final subsidy amount: € 180,000 - (€ 90,000 x 90%) = € 99,000;
  • this results in a recovery payment of €45,000.

• No request for dismissal due to economic circumstances

  The employer is required not to apply for dismissal of its employees for business economic reasons during the subsidy period (from 18 March to 31 May 2020). The condition does not apply to dismissal applications submitted to the UWV during the period from 1 March to 17 March 2020.

  If a request for dismissal is nevertheless made and this request has not been withdrawn (in time), a correction will be made when determining the final subsidy. The wages of the employees for whom dismissal has been requested will be determined, wages will then be increased by 50% and this amount (the wages and the increase of 50%) will be deducted from the total wage sum on which the final amount of the subsidy is based. For eg:

  Wages and salaries in advance = € 3,500,000 (January 2020)

  • an application for dismissal is made for 100 employees based on business economic reasons;
  • the salary of these 100 employees in January 2020 (the reference month) amounts to € 350,000;
  • this amount, plus the increase of 50%, will be deducted from the wage sum used for the final amount of the subsidy (March, April, May 2020);
  • if wage sum would still be the same (€ 3,500,000), an amount of (1.5 x € 350,000 =) € 525,000 will be deducted;
  • the wage sum that will be taken into account for the final subsidy = €2,975,000.

• Informing the works council, employee representation or employees

The employer is obliged to inform the works council, the employee representative body or, in the absence thereof, the employees about the subsidy.

Abuse and improper use

The starting point for the application is that the employer is responsible for the information it provides in its application. The employer must therefore manage accountable records so that it can be checked afterwards for subsidy accuracy. If requested, the employer provides access to these records for up to five years after the subsidy has been determined.

In addition, the employer is obliged to report immediately if it is clear that it no longer meets the requirements for subsidies.

An exchange of information between the Tax and Customs Administration and the UWV is used to verify the information provided by the applicant.

Please let us know if a call would be useful in respect of the EBM, we are very happy to do this on a relationship basis.

See our Coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.