COVID-19 and Employment contracts

Human resources in times of crisis

In many countries, labour laws usually protect employees. In this period of crisis, different kinds of problems arise: some companies face an obligation to stop or reduce their activity, while others need to carry on (or even produce more) in a complex sanitary framework.

How should an employer react when employees cannot go to the office (for sanitary or childcare reason)? Can an employer stop paying an employee if there is a diminution of work? Are there restrictions to redundancy plans during the crisis ?

Our experts give an overview of the financial support measures provided by the governments during the pandemic and of those restricting the possibility to terminate employment contracts.

They also present the leverages offered to employers to adapt working conditions during the emergency period.

Check out the FAQs of the country of your interest and get in touch with our experts for more information.

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How to deal with a reduction of business during COVID-19 pandemic ?

The Dutch government does not have a compensation for reduced working hours anymore. Instead, the government created a subsidy for companies experiencing a reduction of turnover of 20% or more due to the corona-crisis. This so-called NOW subsidy, at a maximum, will cover 90% of the wage costs for a duration of 3 months, during March, April and May 2020. The measure may be extended by the Dutch government for another 3 months.

For HR purposes, it is useful to realize that the NOW subsidy is not related to the actual working hours. Under the NOW, the intention is that the employer keeps its employees and remains to pay them in full. Mostly, employees are still working –depending on impact of health measures – either fulltime or part-time, remotely or on site, fully in their original job or having been assigned alternative tasks.

How the NOW works in 10 (oops 12) bullets:

  • You assess the reduction of the company turnover over a period of the months March/April/May 2020 compared to the total turnover of 2019 divided by 4 (the average 3 month period in 2019).
  • Alternatively: You may also compare an assessment of loss of turnover over April/May/June OR May/June/July in 2020 to the average 3 month period of 2019 as above.
  • For companies that are part of a group, turnover reduction must in principle be measured collectively for all group companies with Dutch social security wages.
  • Your subsidy will initially be based on the social security wage sum of January 2020 plus a markup of 30% for costs other than base salary for 3 months. Salaries taken into account are capped at EUR 9,538 gross per month per person.
  • For some companies the wage sum of March 2020 instead of January 2020 can be used, such may be advantageous for companies with seasonal fluctuations.

Your subsidy will be:

  • In case of a reduction of 100% turnover  90% of the wage sum (plus 30%) over the 3 months of March/April/May 2020
  • In case of a reduction of 50% turnover  45%
  • In case of a reduction of 25% turnover 5%
  • Your subsidy must be used in order to keep paying salaries
  • You must inform your Works Council (or staff representative body) of your NOW application
  • You apply for the NOW subsidy at the state authority UWV:
  • You will receive a 80% advance of the estimated subsidy based on the assessed reduction of turnover and wage sum of January. The first of three payments will be made within 2-4 weeks of the application

There will be final assessment based on:

  • the actual reduction of turnover over the 3 month period in 2020 of your choice (see above) compared to the average 3 month turnover of 2019;
  • the actual wage sum over the period of the subsidy. A reduction in personnel will case a reduction of the final subsidy
  • If you not renew contracts or let people go compared to the wage sum of January this will have a negative effect on your subsidy. If you apply for a permit to give notice for economic reasons a further penalty (50%) will be due.

The above outlines the basics. Further conditions relate mainly to prevention of misuse and fraud. You will be required to hold up-to-date records of administration available, inform the UWV of any relevant developments and present an auditor’s report to demonstrate the actual loss of turnover for the final assessment to be made.

The NOW measure is meant for all employers, including foreign companies, with Dutch social security wages and covers potentially, all employees, including flex workers. A foreign employer does require a Dutch bank account.

The deadline to file a request is 5 June 2020.

Other Dutch measures to assist companies in times of the COVID-19 crisis include many types of tax postponements and loans against favourable terms. Specific measures are currently in place for independent contractors, start-ups and scale-ups, specific types of the agricultural sector, the cultural sector.

What if I had just hired someone? Can I take my employment offer back ?

There are possibilities during a legal probationary period. Such a probation period should be included in the written contract of employment. Even then, it is possible that the company is required to pay a compensation. Since at this time, the crisis was likely already a known fact at the time the contract was offered or concluded, chances to withdraw a definite offer that is accepted are currently slim.

Can I impose my employees to take their remaining days of paid leave ?

No. You may encourage employees to take time off also during these times. You may ask them also to contribute voluntarily and take up days. Depending on your contract (or collective agreement where applicable) you may have a right to determine some days collectively.

How to deal with employees that cannot go to work/provide work from home, because they have to take care of their children ?

In the Netherlands, the primary schools will be opened from 11 May. Likely part-time as groups will be smaller.

The duties for employers and employees in these extraordinary times are covered by the general duty of reasonableness and fairness in the employment relationship. The duty to act as a good employer and as a good employee.

Best practise would be to consult and determine the reasonable options with employees. This means the duties are potentially different for a single parents, parents whose partner works in a crucial job (health care), has many children, is vulnerable, etc. The simple question to openly discuss would be, what is possible, what is efficient and workable. Efforts from the side of the employee are also required, within reason. Parents are for instance working part-time and sharing tasks amongst partners or with neighbours including home-schooling and taking care of each-others children in small consistent groups so that 50% of the working time is at least saved.

What should I do if there is still some business to do ? How can I anticipate the end of the lock-down ?

During the partial lock-down, and highly probably also afterwards, a priority is given to working remotely from home.

Companies have been strongly encouraged to organize working from home as much as possible.

When it is not possible, then the employer has a duty to organize the workplace in a way that respects social distancing (1.5 m) and hygiene and other guidelines of the government. This includes measures to avoid crowds and gathering also in commuting by, for instance, working with flexible hours or shifts.

Specific industries may well be required to comply with industry specific standards as developed by social partners (unions and employers organisations), potentially set out by a collective agreement. It is advised to confirm company specific measures in a risk assessment document. Where there is a health risk officer in the company, naturally he/she must be involved. Depending on the seize of the company and the industry, the Works Council or staff representation as well as the Arbo-service and/or company doctor may be involved.

Do I have the right to terminate contracts in this period?

Yes. A company has the same technical possibilities for termination as before.

However, the NOW subsidy may well be reduced. See above under 1. The intention and therefore one of the conditions for the subsidy is that during the subsidy no requests for terminations for economic reasons are submitted. Also, in the event that a company does request a termination, it must show that even with the NOW subsidy, it would still be necessary to terminate.