In our blogs of 31 March and 9 April 2020, we informed you about the Temporary emergency measure bridging for work retention regulation (NOW). This is the wage subsidy scheme for companies that suffer a loss of more than 20% in turnover as a result of the Covid-19 outbreak. See blogs Blog Details NOW March 31, 2020 and Blog Amendments NOW April 9, 2020.
The NOW regulation has changed again on May 1, 2020. One of the reasons for this is the plea from the Labor Foundation (Stichting van de Arbeid) for an extension of the regulation, such that an operating company can also apply for wage subsidy, based on the NOW regulation. According to the Labor Foundation, this prevents operating companies from having no other option than collective dismissal and redundancy of the employees to unemployment benefit. The business community has also been asked to relax on this point, because in determining turnover at group level, the aim of the scheme, job retention, could not always be achieved. For example, if a group operating company with very diverse activities is confronted with a 20% decrease in turnover or more, but the activities of the other operating companies of the group continue and there is therefore no 20% turnover decrease at group level. Insufficient internal solidarity can lead to layoffs within the individual operating company. The NOW regulation has been adjusted in this respect.
The most important substantive change concerns the possibility for individual operating companies of groups with less than 20% loss of turnover to still apply for NOW based on the decrease in turnover of the operating company. The auditor will have to determine that there is a less than 20% decrease in turnover at group level and that there is at least a 20% decrease in turnover at the operating company level.
It must be an operating company with its own legal personality. This means that a part of a legal person, such as an establishment or business unit, is not eligible separately.
The following conditions are required to qualify for NOW as an operating company:
1. There is no question of a personnel BV. Personnel BVs must always assume a decrease in turnover at the group level. Only an operating company that employs staff and generates turnover can apply NOW.
2. There is an agreement with relevant unions about job preservation within the operating company. This will usually be the union with which the collective labor agreement has been concluded. If no unions are involved in an operating company with 20 or more employees, an agreement with another employee representation is sufficient. If the operating company has less than 20 employees, an appointment can be made with an employee representation. The auditor must provide a statement that this condition is met. If this condition is not met, there is no entitlement to the subsidy and the advance will be reclaimed afterwards.
3. Not dividend or bonus is paid and own shares are not buyed. If the operating company appeals to the NOW, the group must declare prior to the application that it will not distribute 2020 dividends or bonuses or buy back its own shares. This applies until and including the date of the shareholders' meeting at which the annual accounts are adopted in 2021. A group must comply with this obligation, failing which the subsidy will be set at nil.
Bonuses include both profit sharing and other bonus payments. The prohibition of bonus payment only applies to the management and board of the group and the operating company that NOW applies for. It therefore does not apply to other personnel.
An exception applies if an entrepreneur is obliged to pay a dividend on the basis of a declaration with the tax authorities or a statutory obligation under tax legislation.
In order to limit strategic behavior as much as possible, a number of conditions and guarantees have been included, such as, for example, the mandatory correction of the drop in turnover when employees of the operating company are loaned to another entity within the group. Transferring work to other operating companies at the expense of the subsidy-requesting entity is also prohibited. The accountant has an important role to play here.
The relaxation only applies to applications made after the change has entered into force, i.e. for applications from 5 May 2020.
If you have any questions about the NOW or other options that you, as an entrepreneur, have for reorganization and / or cost savings during the Corona crisis, please contact one of our specialists.