Coronavirus – possible wage relief for employers

Increasing numbers of employers are applying to the Ministry of Social Affairs and Employment for permits to apply reductions in working hours (in Dutch: Werktijdverkorting, “WTV”) arising from Coronavirus (Covid-19) and the resulting government measures. If they have such a permit, employers can then apply to the Employee Insurance Agency (UWV) for a temporary payment under the Unemployment Benefits Act (in Dutch: Werkloosheidwet, “WW”) for their employees.

There appears to be a lot of uncertainty about WTV and mostly about the duty to continue paying wages. We will give an explanation of this in what follows.

Conditions for reduction in working hours

A WTV permit is issued if the employer has at least 20% less work for a period of between 2 and 24 weeks because of some extraordinary circumstance that is not part of its normal commercial risk. The government has now classified Coronavirus as being such an extraordinary circumstance.

A permit will not be issued:

  • for the period before the date when the ministry receives the WTV application. This means that WTV does not have retroactive effect;
  • to the extent that the number of staff members working for the employer’s business is not in line with reasonable requirements (i.e. where the employer just has too many employees on the payroll);
  • if the reduction in work is associated with a strike.

The ministry issues a WTV permit for a maximum of six weeks. If there is still not enough work after this, the ministry can extend the permit up to three times, each for a maximum of six weeks.

A WTV permit cannot be applied for in relation to agency workers, on-call staff with zero hours contracts or employees who became ill before the WTV permit period started. For this last category, there is after all an obligation to continue paying wages based on illness. Self-employed individuals without employees are also excluded from WTV. However, they can possibly rely on the Assistance for the Self-employed Decree [Besluit bijstandverlening zelfstandigen].

Obligation to continue paying wages

Various (government) websites, such as rijksoverheid.nl, state that employees generally don’t notice WTV and just receive their normal wages. This means that employers using the WTV would have to continue paying full wages and would be (partially) compensated retroactively for any working hours when the employee did not work, by way of the Unemployment Benefits Act (WW) payments awarded to their employees.

First of all, these WW payments are much lower than an employee’s normal wages. The employers therefore pay part of the wage costs for hours when no work is done. If wages are equal to the maximum daily wage, this represents a difference of 25-30%. If wages are more, the difference is even bigger.

What a lot of employers don’t know, in addition to this, is that the statutory right to continued payment of wages when there is insufficient work was amended on 1 January 2020. The Regulation on Unworkable Weather (in Dutch: Regeling onwerkbaar weer) also entered into force on that date.

Regulation on unworkable weather and lapse of obligation to continue paying wages

The title of this regulation is misleading, as it also deals with other extraordinary circumstances, apart from natural extraordinary circumstances such as frost or torrential rain. In terms of this Regulation, the employer’s obligation to continue paying wages lapses if it has obtained a WTV permit.

If the employer obtains a WTV permit, it does not therefore have to continue paying wages to the employees who are covered by that permit. Those employees will then have to rely fully on WW payments for the period by which their working hours are curtailed.

The Regulation on unworkable weather makes no exception for employees who have not built up sufficient WW rights. This means that they too have no right to wages during the WTV period. In addition, employees on high salaries are not compensated for the difference in income resulting from the lower WW payment.

Conclusion

Employers can avail themselves of the possibility offered by the new Regulation on unworkable weather to avoid their obligation to continue paying wages during the WTV period. The question now is whether a lot of employers will take advantage of this opportunity during the Coronavirus crisis.

Inge Slangen & Eric van Dam