All you need to know about the Dutch Wage Subsidy
Category: Administrative law
The ‘NOW’ is a Dutch government allowance intended to accommodate employers in the Netherlands who are faced with a loss of turnover during the Covid-19 crisis. This allows them to continue to pay their employees who are on permanent and flexible contracts. The condition for the allowance is that you have a loss of turnover of at least 20% for a period of 3 consecutive months. Check the UWV website for details of the NOW scheme. In this blog I discuss the possibility of objection and appeal if you do not receive the allowance / subsidy that you think you are entitled to.
Basics of the the Dutch Wage Scheme
- Based on the application , the UWV will provide an advance payment of 80% of the expected final subsidy;
- Employers will continue to pay their employees 100% of their wages if they make use of the compensation scheme;
- Only after the initial advance (after a few months or even later) will it be determined what the actual decline in turnover has been;
- Because the final decision on the NOW subsidy amount will only come at a later stage, an adjustment can be made to the subsidy amount. It is therefore possible that a portion of the allocated amount must be repaid.
- You can find details about the subsidy under the NOW scheme here .
What type of compensation is contemplated by the Covid-19 wages measure?
The Temporary Emergency Bridging Measure (NOW) is a wage subsidy scheme. Title 4.2, Article 4:21 to 4:80 of the General Administrative Law Act (Awb) is the legal regulation implementing this scheme in which all rights and obligations derived from subsidies are regulated by the Dutch government.
Withdrawal and amendment of the subsidy is regulated in art. 4:48 and 4:49 of the Awb. The final determination of the subsidy will only take place after the advance payment has been made to the applicant. The NOW advance payment is therefore a conditional claim to the subsidy scheme, the exact size of which will not be determined at the outset of one’s application. The subsidy determination is therefore the decision which establishes the final NOW subsidy, which must be objected to within 6 weeks if you do not agree with the decision.
Temporary bridging scheme for self-employed entrepreneurs and persons (Tozo)
The Temporary Bridging Scheme for Self-Employed Entrepreneurs (Tozo) is one of the measures taken by the government to support entrepreneurs during the Covid-19 crisis. The subsidy scheme is intended for self-employed entrepreneurs as well as self-employed persons. This financial support can be requested in the form of an additional subsistence allowance and / or a loan for working capital. The subsidy scheme is implemented by individual municipalities within the Netherlands and self-employed persons and entrepreneurs who wish to make use of the scheme can contact the municipality where they are registered. Those who think they are eligible for the scheme can do the ‘Tozo’ check here.
Working time reduction (WTV) has been converted to NOW allowance
The Working Time Reduction (WTV) scheme has been terminated as a result of the scheme not being applicable to the exceptional situation presented by the corona crisis. If you had previously submitted an application for WTV, the UWV regards this as an application for the new NOW subsidy scheme. As a result, if an employer has applied for WTV, but has not yet received a permit, the application will automatically be converted to the NOW application and the UWV will request certain data indicating turnover from the employer. The UWV will contact you directly for this purpose. If a WTV permit has been granted, an employer may use it under the conditions of the WTV itself. If the WTV permit expires however, the employer must submit a NOW application in light of the WTV scheme no longer being applicable.
Important considerations in making a determination on the Covid-19 support
The NOW subsidy must be used to pay an employer’s labor costs and not for any other matters. The scheme also applies to employees with a ‘call-up’ or ‘zero-hour’ contract, however, it does not apply to temporary workers that have been hired by a company. Nevertheless, the subsidy scheme is currently being worked out in further detail and it is important to keep an eye on the website of the UWV and the Ministry of Social Affairs and Employment for updates on important information. During this time it would be wise for employers to keep accurate records so an accountant will be able to provide a definitive statement indicating a reduction in turnover based on ones records. It is important for the UWV to be able to check, on the basis of the information provided, whether one meets all the conditions for the subsidy. The information and records must be kept for up to 5 years after the determination of the allowance. Furthermore, the subsidy recipient must send the UWV an auditor’s statement after the end of the subsidy period which indicates the final loss of turnover. The UWV website will state how you must submit this statement.
Article 4:45 of the AwB provides that the subsidy applicant has an obligation to account for and justify their application. One must therefore cooperate with an investigation by the UWV if this is necessary to make a decision about the subsidy, however, this does not go so far as to require cooperation in gathering evidence that you have committed an offense. The UWV can carry out an investigation up to 5 years after the allowance has been determined and if they are of the opinion that the applicant is not entitled to the NOW subsidy, it can decide to suspend payment of the subsidy.
Advance payment of Wage subsidy & subsequent decision on the final wage subsidy
The UWV will pay 80% of the NOW subsidy as an advance. The UWV pays this advance every month for 3 months and can also pay this in 1 or 2 instalments. The UWV will calculate the final subsidy allowance over several months and does this on the basis of one’s final loss of turnover (which must be reported to the accountant), including one’s average wage bill for March, April and May 2020. If this is higher than the January wage bill, the UWV will use the January wage bill amount. If the final loss of turnover is higher, then it is evident that one has received too little. In this case, one can expect to receive a supplementary payment from the UWV. If the wage bill you previously submitted is lower, this will result in a lower subsidy and you will have to repay a part thereof.
Shorten, suspend or recover an advance or paid subsidy amount
If, for example, an employer who receives a subsidy under the NOW scheme submits an application for dismissal for business economic reasons, the subsidy can be reduced. The following calculation is used in this circumstance: the wages of the employee (s) for whom the dismissal application is submitted are first increased by 50% and then that amount is deducted from the wage bill for which a subsidy is received. If it turns out that the wage bill has decreased during the period from March to May 2020 compared to the wage bill of January 2020, the subsidy amount will also be set at a lower amount.
Situation if the employer is forced to dismiss staff
One of the requirements of the NOW scheme is not to apply for dismissal from the UWV for business economic reasons. If you do submit a dismissal application to the UWV, it will be processed, but it may have consequences for your NOW subsidy. The final subsidy determination takes into account the wages of the employees for whom dismissal has been applied for. This wage is then increased by 50%. This amount, plus the increase of 50%, will then be deducted from the total wage bill on the basis of which the final subsidy amount is based.
Susceptibility of the wage subsidy to Fraud – the subject of discussion
A lot has been written in the press about the NOW scheme’s susceptibility to fraud. In particular, the involvement of accountants are under scrutiny because they are expected to audit the subsidized company’s records and issue an auditor’s report. Accountants fear that they will have to sit on blisters if a statement is made about the company’s administration that turns out to be incorrect. It is important to note however that the subsidy is linked to the applicant’s turnover but that the concept of turnover is not always defined.
Objecting to an advance payment which is too low
The NOW subsidy applicant who does not agree with the granting (or refusal) of the advance payment can object to the decision which determined and issued the advance. An administrative lawyer can substantively advise on this issue. Even if an advance is granted, this amount may be too low which may be a reason to immediately lodge an objection against the decision. This may be important to survive the crisis. A business owner, or their relevant lawyer, must make a written objection if they do not agree with the NOW subsidy advance or any condition attached to the advance payment.
Suspension of payment in case of withdrawal or amendment of Wage subsidy (Article 4:56 Awb)
Payment of a subsidy amount or an advance can be suspended from the day on which the UWV notifies the subsidy recipient, in writing, of a serious suspicion that there is reason to apply Article 4:48 or 4:49 of the AwB (up to and including the day on which the decision regarding the revocation or change was announced or the day on which thirteen weeks have passed since the notification of the serious suspicion). A serious suspicion, which may lead to a change or cancellation of the subsidy, includes:
• the activities upon which which the subsidy was granted has not fully taken place or will take place in the future;
• the subsidy recipient has not complied with the obligations or conditions attached to the subsidy;
• the subsidy recipient has provided incorrect or incomplete information and the provision of correct or complete information would have led to a different outcome for the application;
• the granting of the subsidy was incorrect and the subsidy recipient knew or should have known this;
• on the basis of facts or circumstances of which it could not reasonably have been aware when the subsidy was determined and on the basis of which the subsidy was determined to be lower than in accordance with the subsidy grant;
• if the subsidy determination was incorrect and the subsidy recipient knew or should have known this; or
• if the subsidy recipient has not complied with the subsidy-related obligations after the subsidy determination.
Final decision of NOW subsidy amount
At a later stage after the issue of an advance payment, the subsidy will be finally determined by the UWV. If the subsidy amount is in line with expectations, then the subsidy process is complete. If the subsidy amount is set lower than one’s expectations and they disagree with the determination, this can be followed up by an objection and appeal procedure. The subsidy allowance can be set lower if:
a. The activities for which the subsidy has been granted have not or will not entirely take place;
b. the subsidy recipient has not fulfilled the obligations associated with the subsidy;
c. the subsidy recipient has provided incorrect or incomplete information and the provision of correct or complete information would have led to a different outcome on the subsidy application; or
d. the subsidy was otherwise incorrect and the subsidy recipient knew or should have known this.
Refusal of the wage support award
If it appears that the conditions of the NOW scheme have not been met (for example, if it turns out that there is less than a 20% loss of turnover), the subsidy can be completely refused. The Council of State has determined that a ground for refusal of a subsidy application must meet three conditions:
(1) it must fit within the framework of the relevant laws and regulations (i.e. the NOW scheme) and the AwB;
(2) the reason for refusal of the subsidy must not be unreasonable; and
(3) the refusal must be sufficiently related to the purpose for which the subsidy should be granted (CLI: NL: RVS: 2017: 1774, Rechtspraak.nl).
In addition, there are certain general grounds contained in art. 4:35 of the Awb in terms of which the NOW subsidy may be refused:
a. The subsidy activities will not or have not taken place wholly;
b. the subsidy applicant will not meet the obligations attached to the subsidy;
c. the subsidy applicant will not properly account for the activities performed and the related expenditure and income, insofar as these are important for the determination of the subsidy;
d. incorrect or incomplete information in the case of a subsidy application has been provided and the provision of this information would have led to an incorrect decision on the application; or
e. the subsidy applicant has been declared bankrupt or has been granted a moratorium, a debt rescheduling scheme is in force or has been applied for.
You can read more on Dutch subsidies in general here.
Objection to a decision regarding final determination of NOW subsidy
The person who wishes to object to the final subsidy decision must submit this to the UWV within the objection period of 6 weeks. An administrative lawyer may assist in the objection, but this can also be done yourself. Because subsidy procedures are legally complex and the financial interests in the procedure are substantial, it makes sense to make use of an administrative lawyer who is specialized in litigating against such government decisions and measures. The objection against the decision in question must be explained, in detail, in the notice of objection. The decision itself should be clearly stated together with all the personal details of the interested parties. The notice of objection is handled by the UWV itself. Within 12 weeks after submitting the notice of objection, a decision must be made. The decision can only be postponed once by the administrative body. If no decision on an objection has been taken within the decision-making period, the administrative authority may be given a notice of default. If no decision on the objection has been taken within 14 days, an appeal can be lodged with the court for a fictitious refusal. If the decision on an objection is negative, an appeal can be lodged with the competent court within 6 weeks after the date of such decision. Only then can the administrative court assess the content of the subsidy decision.
Ask for a preliminary injunction in the event of a financial emergency
If the NOW compensation is claimed back while the objection or appeal procedure is still ongoing, this can be financially problematic. If there is a danger of continuity of the company or a financial emergency arises, a lawyer can request preliminary injunction relief from the judge with the aim of suspending the recovery by the UWV during the proceedings. The financial emergency must be demonstrated, for example, by an auditor’s report. The judge may also make other provisional measures for the duration of the ongoing objection or appeal procedure.
Settlement and reclaim of the NOW advance
Advances which are paid out are deducted from the final subsidy amount awarded. Advances paid out inappropriately can be reclaimed. The UWV can collect the amount to be recovered by writ of execution, insofar as this power has also been granted with regard to the recovery of the principal sum of the subsidy. Please note that the situation of recovery leading to financial distress has already been discussed above.
Collection of the subsidy amount or advance payment by writ of execution
Both the advance and the final subsidy amount can be reclaimed. This is called legal recovery. If (part of) the advance must be repaid and a recovery decision has been taken for that purpose, that amount can be recovered with a writ of execution. The bailiff can seize or take enforcement measures on the basis of the writ of execution to obtain payment. If there is still an objection or appeal pending against the subsidy decision, the collection can be suspended, if necessary through the use of a judge in preliminary relief proceedings. The ongoing objection or appeal procedure is also deemed to be directed against the recovery decision. Objections can be lodged against that decision, but the legality of the subsidy decision is not assessed, unless there is a special situation why this should be the case.
Requesting a deferment of payment if you have to repay the subsidy
Article 4:94 of the AwB provides that the UWV can grant postponement of (re) payment, upon request. The subsidy applicant can also always request a payment arrangement if repayment is required. During the postponement, the UWV, as an administrative body, cannot send a letter of formal notice or demand recovery. The decision to postpone payment states the term for which the postponement applies. The UWV can attach regulations to the decision to postpone payment. The UWV can also withdraw or change the decision to postpone payment or to grant an advance:
a. If the regulations are not complied with;
b. if the other party has provided incorrect or incomplete information and the provision of correct or complete information would have led to a different decision; or
c. insofar as changed circumstances preclude the continuation of the postponement or the granting of the advance.