NOW-3: what are the changes compared to the NOW-1 and NOW-2?

Per 1 October 2020, the Dutch government has extended the Temporary Emergency Bridging Measure for Sustained Employment (‘NOW’) for another 9 months. The NOW-3 scheme was published on the 9th of October and is NOW-1’s and NOW-2’s successor. The NOW compensates employers for the wages of their employees in cases of loss of turnover. This article focuses on the aim, the contents and the most important changes in NOW-3 compared to NOW-1 and NOW-2.

The aim of NOW-3

NOW-3’s aim is to compensate employers in the payment of wages, so as many employees as possible can remain in service despite diminishing turnover. Furthermore, the government intends using NOW-3 for having employers and employees prepare for and adjust to the new economic situation.

The contents of NOW-3

NOW-3 has a longer duration than NOW-1 and NOW-2 and consists of 3 periods of 3 months each:

• Installment 3: 1 October 2020 – 1 January 2021
• Installment 4: 1 January 2021 – 1 April 2021
• Installment 5: 1 April 2021 – 1 July 2021

Like previous NOW regulations, employers will receive compensation for the payment of wages. The amount of the support is related to the percentage of the fall in turnover and the total wage bill over June 2020. The decline in turnover will be determined by comparing 25% of turnover in 2019 with turnover in a period of 3 months, chosen by the employer.

What will change?

Despite the fact that the NOW system will continue under NOW-3, there are a noteworthy number of differences compared to previous editions. The government wanted to use NOW-3 to phase out the support, in order to avoid a shock on the labour market when the subsidy scheme ends. The most important differences will be discussed below.

• The compensation for wages will be gradually decreased: in the third installment, the percentage is 80%; in the fourth installment 70%; and in the fifth installment 60% of the total wage bill;
• During the third installment, the minimum limit for the turnover loss percentage will remain 20%. However, as from 1 January 2021, this percentage will be increased to 30%;
• In installment 5, the support will no longer be maximized at twice the maximum daily wage (€9,691.- per month), but at once the maximum daily wage (€4,845.- per month). These amounts will be indexed as per 1 January 2021;
• For NOW-3, employers may gradually decrease the total wage bill with 10% in the third installment, 15% in the fourth installment and 20% in the fifth installment;
• The amount of support will no longer be reduced if employers end employment contracts because of economic reasons. In addition, the condition that 100% of an employee’s wage will be deducted from the amount of support when this employee’s contract is terminated for economic reasons, will expire;
• The 5% cut on the amount of support in case an employer does not come to agreements with trade unions in case of a collective dismissal, will be removed from NOW-3. Also, the additional conditions which applied under previous NOW editions with regard to collective dismissals, will not apply under NOW-3 (except for the Dutch Notification of Collective Redundancies Act, ‘WMCO’);
• In addition to the obligations from NOW-2, NOW-3 brings some extra obligations for employers to the table. Firstly, the employer has an obligation to guide the employees whose employment is likely going to end, to new work. This obligation applies from the moment that the intention exists to end the employment contract. Furthermore, under NOW-3, employers are obliged to contact the Employee Insurance Agency (UWV) if they have filed for dismissal because of economic reasons. If the employer omits to do so, there will be a 5% cut on the amount of support. Finally, if the employer has been granted the compensation, he is obliged to inform the works council or the employees about this compensation.

What will not change?

• The surcharge for the accrual of i.a. holiday allowance, pension contributions and other employer’s contributions will remain 40% in all installments;
• Employers remain obliged to spend the subsidy effectively and purposefully;
• Employers remain obliged to stimulate their employees to take retraining or reskilling courses;
• Employers are not allowed to pay out bonuses or dividends to shareholders and third parties.

Employers can apply for the first period of NOW-3 from 16 November through 13 December 2020. For the second period it is expected employers can apply from 15 February through 14 March 2021. For the third period, the aim is 17 May through 13 June 2021. Do you have any questions about NOW-3? Please contact our Employment team. We are happy to advise you.