Coronavirus: possible relief for employers

The Coronavirus will undoubtedly affect many companies. As a result, there will be a great need for less or more drastic measures to alleviate the financial pain. In fact, three possible solutions can be distinguished:

1. Is the employee entitled to continued payment of the wages if the employee is unable to work due to Corona implications?

> If the employee has mild complaints and for that reason has been advised to stay at home, the employee is entitled to the usual wage payment (even if the employee cannot work from home).

> If the employer (temporarily) closes the doors, employees can be asked to work from home. If working from home is not possible, employees are entitled to the agreed wage;

• It is possible that the employment agreement or CLA contains a collective holidays option (as a result of which employees can be compulsorily sent on holiday).
• Employees with a flexible scope of work may be temporarily less scheduled.
• If the employer closes the doors temporarily due to less work, the employer may be able to call on the NOW (see below).

> An employee incapacitated for work due to Corona infection is entitled to sick pay.

> The following regulations apply to the employee who is unable to work due to care for the children:

• If the school closes unexpectedly, the employee is entitled to emergency leave to arrange care for children (100 % paid, max 1-2 days).
• If a child is ill and is dependent on care by the employee, the employee is entitled to short-term care leave (70 % paid) for a maximum of 2 weeks. After that, long-term care leave starts (unpaid).

> In consultation and with the consent of the employees, further agreements may be made, for example on the voluntary taking of holidays or other temporary solutions. During the credit crunch, for example, it has happened that employees have agreed to a temporary reduction in working hours/wage.

The applicable CLA / employment conditions scheme may provide for claims in excess of the statutory entitlements.

2. The slightly less short term: Temporary emergency bridging for job retention (NOW)

Below we have listed the most important points of attention for the application for the NOW-scheme. The NOW-scheme is a temporary measure that may not offer sufficient (structural) relief to severely affected employers. For those employers, it is necessary to assess in advance whether a structural reorganisation would be a better solution. After all, the NOW scheme is intended to keep employees actually in work, which is also reflected in, for example, the ‘reorganisation penalty’.

Points of attention NOW control:

The NOW scheme provides financial compensation for the wage bill (‘loonsom’) of employers whose turnover decreases by at least 20% during 3 consecutive months.

• Turnover loss: the employer may choose for which period of loss of turnover over three consecutive months the NOW compensation is requested, to start on: 1 March, 1 April or 1 May 2020. In this way, the employer can ‘steer’ the compensation to be based on the period for which the most loss of turnover is expected. The reference period will be the 2019 turnover, divided by 4. The calculation of the loss of turnover is based on the loss of turnover at group level. The loss of turnover of foreign companies is only taken into account to the extent that these entities pay SV-wages in the Netherlands.

• Reason for loss of turnover: it is not tested whether the loss of turnover was directly caused by the Corona crisis.

• Commencement date: employers can apply for the NOW from 6 April up to and including 31 May 2020. Applications already submitted under the currently expired Reduction of Working Hours-scheme will be converted into NOW applications and will probably have to be supplemented in order to comply with the NOW conditions.

• Level of compensation: the subsidy amounts to a maximum of 90% of those wage costs in proportion to the decrease in turnover, with a maximum of EUR 9,538 per employee per month. The UWV pays an advance of 80% in a maximum of three instalments within 2-4 weeks of the application. This will later be corrected on the basis of the actual wage bill in the compensation period.

• Wage and salary bill: the compensation will be based on the SV wage in January 2020, increased by 30 % flat-rate employer charges (this includes employer’s social security contributions, employer’s pension contribution and holiday allowance). The final compensation will be determined on the basis of the actual wage bill during the compensation period. If the wage and salary bill in the compensation period turns out to be lower than the SV wage and salary bill in January 2020, this will lead to a reduction in the final compensation. However, a higher wage bill in the compensation period will not result in higher compensation afterwards.

• Deployment of flexible workers: the legislator calls on employers to keep employees, including flexible workers, in work as much as possible. This is also what the NOW scheme is intended for. However, employers are not always obliged to deploy employees for a similar number of hours as in January 2020, for example in the case of zero-hours contracts or min-max agreements. The explanatory memorandum to the NOW states that if the wage bill in the period March-May 2020 is lower than the loss of turnover (in terms of percentage) as in January 2020, no subsidy will be granted. The reason for this is that the NOW is intended to stimulate employment, and if the wage bill is lower the employer can bear the costs himself, the idea is. This results in the situation that a 50% lower wage bill at 50% loss of turnover leads to zero subsidy and thus the obligation to repay the entire advance. As a result, it is relevant for employers to calculate what impact the (dis)continued deployment of flex workers deployment will have on the level of compensation.

• Prohibition of dismissal: when the scheme was announced, it was stated that employers would have to commit themselves, when applying for NOW compensation, not to carry out any commercial dismissals during the compensation period. It appears from the published scheme that the ‘prohibition on dismissal’ is limited to submitting an application for dismissal to the UWV for business economic reasons during the NOW compensation period (this applies to all business economic reasons, i.e. not only loss of turnover but also organisational changes). The prohibition of dismissal therefore does not apply to: dissolution before the subdistrict court, amicable settlements, probationary dismissal or non-renewal of temporary contracts. However, these forms of dismissal may affect the amount of compensation since the advance payment is based on the SV wage in January 2020.

• Reorganisation penalty: if an employer does apply for dismissal for business economic reasons during the period 18 March – 31 May 2020, the employer will not be disqualified from the NOW scheme, but a correction factor will apply: the wage bill of the employee(s) concerned + 50 % (i.e. a total of 150 % of the wage bill of the dismissed employees) will be deducted from the wage bill to be compensated. This also applies if the application for dismissal is rejected by the UWV.

• Obligation to provide information: the OR/PVT or employees must be informed about the grant. There is therefore no right of consent or advice for the Works Council and information is only formally required at the time of granting the subsidy (and not already at the time of the application). It does, however, make sense to inform the Works Council at an earlier stage. Please note: failure to comply with this obligation may result in recovery of the subsidy (Article 15 NOW).

• Extension: it is possible that the scheme will be extended by the same period after the first period of three months has elapsed.

• Legal remedies: do you disagree with the decision on the NOW application? If so, there is a right of objection and appeal.

3. The medium term: reorganization through redundancies

The final element of the conceivable solutions is a reorganisation in which the employer proceeds to necessary redundancies. This process runs via the UWV. It costs the employer time (at least 6 to 8 weeks, plus observance of the remaining part of the notice period) and money (mainly due to continued payment of wages during the process and the transition allowance). Moreover, the reorganisation will only receive the necessary approval from the UWV if the loss of the jobs is structural, taking into account the upcoming period of at least 26 weeks. These circumstances make the process unattractive in the short term – as opposed to reliance on the wage subsidy under the NOW (see paragraph 2 above).

On the other hand, entrepreneurs can shoot themselves in the foot when making the wrong choice. A company that makes an appeal to the wage subsidy may later still be confronted with an after-claim + fine, even if the loss in turnover back in the months of March-June (or chosen reference period) is evident. This will particularly occur in the case of companies with a limited loss of turnover, which had already said goodbye to their flexible shell in January and February. If it had to be established with hindsight that the job losses are structural in nature, it would have been wiser to reorganise immediately.

The following points of attention are important for a reorganisation:

• If, as an employer, you are considering applying for dismissal for business economic reasons (the a-ground) instead of relying on the NOW, please be aware that the NOW is taken into account by the UWV when carrying out its dismissal duties. This means that when applying for dismissal, the employer will have to make it plausible that dismissal cannot be prevented by relying on the NOW and why not.
• If a works council has been set up, it will first have to be asked for advice. If no Works Council has been set up, but at least 25% of the jobs are lost, a Personnel Meeting must be convened and asked for advice.
• If it concerns 20 workers or more, it is collective redundancy and the trade unions must be involved.
• Dismissal is only possible by means of a settlement agreement (these also count towards the collective dismissal!) or with a UWV dismissal permit.
• There must be demonstrable evidence of a reduction in work and/or a poor financial situation.
• First of all, you will have to say goodbye to the flexible shell. Has the desired reduction not yet been achieved? Then the permanent staff will be eligible for dismissal.
• The following should be considered: in the case of dismissal within a group of direct colleagues, it should be determined within age cohorts who are eligible for dismissal (‘afspiegelen’).
• No dismissal is possible if the employee can be reinstated in a suitable position.
• No dismissal is possible if there is a termination ban, such as illness.
• Once a dismissal permit has been obtained, a notice period applies. The procedure time at the UWV may be deducted from this, but at least one month of notice always remains.
• The employee is entitled to a transition allowance: 1/3 month’s salary per year of service, regardless of the length of his employment.
• If the job becomes available again within 26 weeks after dismissal, the dismissed employee is the first to be entitled to that job again.
• The settlement agreement offers the possibility to promise employees that they will be reinstated as soon as things improve.

Please contact us if you would like to discuss one of the three possible solutions.

Updated on 3 April 2020