News Update Employment & Pensions
22 December 2021
On 21 December 2021, another extension of the NOW was announced. Companies can receive subsidies for 90% of their loss of turnover instead of 80%. In this News Update we provide an overview of the latest developments with regard to the reopened NOW and we discuss the latest developments with regard to the Pension Agreement.
NOW scheme reopened until 31 March 2022On 26 November 2021 the Dutch government has decided to reopen the NOW scheme (the Temporary Emergency Bridging Measure for Sustained Employment, Tijdelijke Noodmaatregel Overbrugging voor Werkbehoud) for employers whose turnover has fallen by at least 20% as a result of the new restrictions since 28 September.
NOW 5 is almost identical to NOW 4, with the exception of a small number of changes. In practice, the principal changes compared with the previous NOW rounds are as follows:
- the payroll exemption rate has been raised to 15%;
- the maximum reported loss of turnover is increased to 90% (even if the loss of turnover is estimated to be between 90 and 100%);
- NOW 5 is also available to start-ups that launched after 1 February 2020 but no later than 30 September 2021;
- September 2021 is used as the reference month;
- the drop in turnover is calculated over November and December 2021; and
- starting with NOW 5, a new method is used for calculating the reference turnover in the event of divestments, under which the company needs to eliminate the turnover of the divested division or operations.
If an employer applies for approval to dismiss employees on economic grounds while claiming the NOW subsidy, those employees have a best endeavours obligation to cooperate in finding new employment. This must be reported to the Employee Insurance Agency (UWV), otherwise the subsidy will be cut by 5%. This obligation starts on 27 November, i.e. the date on which the extension of the NOW facility was announced.
On 14 December 2021 the government announced that a NOW 6 will follow, meaning that employers can also apply for NOW subsidy for January, February and March to continue to pay their employees. NOW 6 will provide a similar level of subsidy as NOW 5. The government will announce the terms of NOW 6 in January 2022.
On 21 December 2021, another extension of the NOW was announced. Employers can receive subsidies for 90% of their loss of turnover instead of 80%. Because the subsidy applications for the current quarter are already underway, the payment of the advances is still based on a maximum loss of turnover of 80%. The final determination is based on 90%.
Return of the Reduced Working Hours scheme
With the introduction of the NOW scheme during the pandemic, the Reduced Working Hours (Werktijdverkorting) scheme was put on hold. However, the government has now reactivated the scheme effective 1 October 2021.
This scheme provides support to employers that are hit by short-term extraordinary circumstances that are not regarded as normal business risks, for example, fire or flooding. Employees granted reduced working hours are paid temporary unemployment benefits.
The scheme is expressly not intended for pandemic-related situations. Given the structural nature of the current phase of the pandemic, the consequences of pandemic-related restrictions are now considered to constitute a normal business risk.
While NOW 5 is in place, the Reduced Working Hours scheme will remain available to employers hit by events that are not related to the pandemic.
Latest developments on the National Pension AgreementThe National Pension Agreement was signed in early-June 2019, containing arrangements between the Dutch government, employer organisations and employee organisations about overhauling the pension system in the Netherlands. Those arrangements have been further fine-tuned since then and have produced several legislative proposals. The most important of these is a draft bill for the Dutch Future of Pensions Act.
The draft bill for the Dutch Future of Pensions Act (Wet toekomst pensioenen) was published for online consultation on 16 December 2020. A new draft version of the bill, incorporating some of the feedback from the consultation round, was referred to the Dutch Council of State for advice on 26 November 2021. The Council of State’s advice is expected in the spring of 2022, after which the bill will be presented to the Dutch House of Representatives.
National Pension Agreement
The National Pension Agreement was signed in early-June 2019, containing arrangements between the Dutch government, employer organisations and employee organisations about overhauling the pension system in the Netherlands.
The legislative package deriving from the National Pension Agreement comprises three bills: the Dutch Rescheduling of Incremental Increase of State Retirement Age Act (Wet temporisering AOW), the Dutch Lump Sum Payments, Early Retirement Schemes and Leave Savings Act (Wet bedrag ineens, RVU en verlofsparen) and the Dutch Future of Pensions Act (Wet toekomst pensioenen).
Dutch Rescheduling of Incremental Increase of State Retirement Age Act
The Dutch Rescheduling of Incremental Increase of State Retirement Age Act entered into force on 1 January 2020. It freezes state retirement age at 66 years and 4 months for 2020 and 2021, instead of 66 years and 8 months as per previous agreements. State retirement age will increase again starting in 2022, but will only rise by 8 months per year of the longer life expectancy, instead of a full year.
Bill for the Dutch Lump Sum Payments, Early Retirement Schemes and Leave Savings Act
This bill became law on 1 January 2021, and contains arrangements for:
- the possibility for pension fund members to draw a lump sum payment of 10% of their pension capital on reaching retirement age;
- a temporary relaxation of the rules for early retirement schemes and the final levy; and
- additional possibilities for tax-facilitated savings for various forms of leave.
Lump sum payments
The existing rules do not allow for lump sum payments, i.e. a partial commutation of pension capital. In neighbouring countries, however, it is possible for pension fund members to commute part of their pension capital for specific purposes. Introducing a similar facility in the Netherlands requires changing the law to prevent a punitive tax levy on the payment of part of the member’s pension capital. The pension fund’s administrator is obliged to allow the commutation, provided that the following conditions are met:
- the amount commuted may not represent more than 10% of the accrued value;
- the commutation must take effect on the member’s retirement date;
- the member may not simultaneously apply the high/low scheme (an arrangement offering variable pension benefits); and
- the balance of the pension capital must be more than the statutory commutation threshold for small pensions (i.e. approximately EUR 485 per year).
Originally, the proposed arrangement was to allow a lump sum payment from the second pillar pension with the employer’s pension plan on the member’s retirement date, or else in February of the year following the year in which the member reaches state retirement age. This has since been abolished, and the latest proposal is to allow lump sum payments only for pension fund members who start drawing their second pillar pension under their employer’s pension plan in the month during which they reach state retirement age, or else on the first day of the following month. In that case, the lump sum payment may be pushed back until 1 January of the year after the member reaches state retirement age. An extended period between retirement and drawing the lump sum payment has proved impractical.
The targeted date of entry into force of this specific part of the new Act is 1 January 2023, with a review after two years.
Early retirement schemes
Some employers have arrangements that allow older employees to bridge the period until they reach state retirement age or their retirement date. Depending on the details, these arrangements might qualify as an early retirement scheme, and the employer will be charged 52% on the payments, similar to a final tax levy. To accommodate older employees, the National Pension Agreement provides for an allowance that is exempt from the punitive levy on these early retirement schemes from 2021 until the end of 2025. Under this exemption facility, the employer will not have to pay the punitive levy if the following conditions are met:
- the employee must start drawing the benefits within the final three years before reaching state retirement age, and for no more than three years; and
- the gross benefits may not exceed an as-yet-undefined threshold (EUR 1,847 per month, EUR 22,164 per year).
If the benefits exceed this threshold, the employer will be charged the punitive levy on the difference. The punitive levy will also be charged if the early retirement begins more than three years before the employee reaches state retirement age. This temporary relaxation of the rules for the punitive levy on early retirement schemes will primarily benefit early retirement for employees with lower wages. For higher wages, the benefits will generally exceed the exempt allowance and the employer will be charged the punitive levy on the difference.
Additional possibilities for leave savings
The existing tax arrangements for saving towards tax-facilitated holiday leave and compensatory leave will be increased, allowing leave savings with a value of 100 weeks instead of the present 50 weeks. Although this tax-facilitated leave may be used for early retirement, it may also be put towards other forms of leave such as caregiver leave or a sabbatical.
Draft bill for the Dutch Future of Pensions Act
The online consultation phase has ended, and more than 800 responses to the draft bill have been processed. The second draft of the bill for the Dutch Future of Pensions Act has now been referred to the Dutch Council of State for advice. This second draft is expected to be published in the spring. The plans for the bill to enter into force have been pushed back by a year to 1 January 2023.
Some of the key elements from the bill are:
- Employers and their employee organisations have until 1 July 2024 to make their draft decisions on a new pension plan, on how to compensate employees, former employees and pension beneficiaries and on whether or not to convert previously accrued pension entitlements and rights under the new pension plan. All decisions for these new pension plans based on the defined contribution system must be finalised by 1 January 2025. The two types of defined contribution plan to choose from are a “solidarity-based” defined contribution plan and a “flexible” defined contribution plan. All pension plans must be aligned with the new legal framework by 1 January 2027. Existing plans based on salary and/or years of service (e.g. final-pay and average-pay plans, including those funded from fixed or capped contributions (CDC plans)) may not remain in place after 1 January 2027.
- Employers and their employee organisations must draw up a transitional plan for switching to the new pension plan, using information provided by the pension administrator.
- Where necessary, members need to be given “sufficient” compensation for the transition to the new pension plan, although the transition itself must be cost-neutral. The transition plan should explain how the switch to the new pension plan will be handled for employees.
- Starting 1 January 2024, pension administrators will start implementing the new arrangements. The deadline for finalising that implementation is 1 January 2027.
- The contributions that will be made available for old-age pensions and partner pensions after the member’s retirement date will, for the present, be capped for tax purposes at 30% of the member’s pensionable salary. This rule applies to all pension plans. The costs of insuring the risks and of pension administration are not included in this figure.
- Every employee will accrue their own individual pension capital, to purchase a fixed or variable pension on their retirement date.
- Every employee, regardless of age, is entitled to the same percentage of pension contributions from the employer under the pension plan.
- A transitional arrangement will be introduced for defined contribution plans and insured average-pay plans that are in place before 1 January 2023 and that are based on “progressive” contribution scales. In some specific cases, defined contribution plans that use a progressive scale may be continued for existing employees.
PCB caregivers no longer excluded from social securityOn 16 December 2021, the Rotterdam District Court rendered judgment in a case concerning the legal position of caregivers paid from their patient’s personal care budget (PCB).
The case had been brought by a woman who carried out work under a caregiver contract for a patient who paid her from their PCB.
When the caregiver found herself without work and applied for unemployment benefits, the Employee Insurance Agency (UWV) denied her application, arguing that it did not regard the work as insured labour.
According to the Dutch At-Home Services Regulations (Regeling dienstverlening aan huis), PCB caregivers do not accrue any entitlement to unemployment benefits or other social security. Women are disproportionately affected by these regulations, and the court ruled that they constitute indirect discrimination.
It follows that the UWV should not have qualified the caregiver’s work as uninsured labour. PCB caregivers who work less than four days per week are also entitled to claim unemployment benefits and other forms of social security.
Houthoff's team, consisting of Claire Reynaers, Freeke Heijne, Suzanne Hogendoorn and Vera van Erpers Roijaards, joined forces with women’s rights organisation Bureau Clara Wichmann and Clara Wichmann Association for Women and Law to assist the caregiver on a pro bono basis.
Contact Claire Reynaers for details.
You can read the judgment here (only available in Dutch).
Highlighted publicationThree of the same, but each one different
Flexible work has become very popular, and it can take various different forms. Margot van Herwerden’s contribution zooms in on the differences between employment contracts and contracts for services. It is not always easy to distinguish between the two, as evidenced by the vast amount of case law on the topic. Margot identifies some points of reference for how employment relationships are qualified by discussing three recent but very different judgments that all dealt with same issue.
Contact Margot van Herwerden to find out more.
Read the full article here.