The Government of Aruba, via Banco di Seguro Social (SVb), announced the final details of the payroll relief plan, named WAGE SUBSIDY, which will be provided as financial support to local companies that are dealing with the impact of the COVID-19 pandemic and the measures taken by the Government of Aruba to prevent further infection, including the “shelter in place” rule.
The Government of Aruba offers this Wage Subsidy to employers to facilitate as much job retention as possible for those companies that have been hit hardest by the COVID-19 pandemic and by the measures taken by the Government of Aruba, and to ensure a partial continuation of pay.
WHAT IS THE WAGE SUBSIDY?
The Wage Subsidy is a financial support scheme that will be provided to local companies facing a decline in sales of 25% or more due to the current situation. All employers that apply and satisfy the requirements will receive a Wage Subsidy in order to guarantee job retention for as many employees as possible, even with less or no economic activity and declining sales, and to guarantee a partial continuation of pay.
The financial support is granted as a subsidy, not a loan. The Wage Subsidy is granted on a monthly basis (starting in May 2020). Employers must apply for the Wage Subsidy each month. The Wage Subsidy will be advanced to the employer based on the expected decline in the company’s sales. The advance on the Wage Subsidy will be paid out by the SVb. The actual decline in sales will subsequently be determined based on the company’s tax returns and other financial dates; if necessary, the Wage Subsidy will then be adjusted.
The Wage Subsidy consists of the following two elements:
- 60% of the SVb-wages subject to the SVb wage limit (Afl. 5,850), to make it possible for the employer to continue to pay its employees at least that portion of their gross wages
- 11.6% of the qualifying SVb wages, subject to the SVb wage limit (AWG 5,850), as partial compensation for the employer’s other employee costs (including the employer’s share in the social security premiums)
NOTE: These percentages are then multiplied by the percentage of the decline in sales. The maximum total Wage Subsidy is therefore 71.6% of the SVb wages (subject to a maximum of Afl. 5,850).
The precise amount of the subsidy is based on the approved resolution of the Council of Ministers of the Kingdom of the Netherlands on the request of the Government of Aruba, calculated as follows:
- The sum of the SVb wages of all employees registered with the SVb, subject to the SVb wage limit (Afl. 5,850).
- Multiplied by 71.6%.
- Multiplied by the percentage in the expected decline in sales for the respective month. The expected decline in sales is obtained by comparing the expected sales for May 2020 with the actual sales in May 2019.
As explained above, employers are obliged to continue to pay their employees a gross amount of at least 60% of their qualifying SVb wages, subject to the SVb wage limit (AWG 5,850). The implication is, therefore, that the maximum reduction for short-time working is 40% (for salaries below the level of the SVb wage limit).
The employer must – apart from the employee’s share in the general pension premiums – withhold wage tax and the employee’s share in the social security premiums from the gross wages paid to the employee. These are therefore also covered (up to 60% of the SVb wage limit) by the Wage Subsidy and must be declared and paid, together with the employer’s share in the social security premiums (which are partially covered by the Wage Subsidy also), to the Tax Department and the SVb before the 15th of the following month.
Assume: you have a monthly payroll of AWG 10,000 (5 employees of AWG 2,000 each). Your sales dropped 100% in May 2020. You were basically closed during May 2020. The employers’ part of the social securities for your particular business is 25.3% (this varies depending on the percentage of the OV – accident insurance).
You will receive from Government (SVB):
100% of 60% of AWG 10,000: AWG 6,000
100% of 11.6% of AWG 10,000: AWG 1,160
The total you will receive: AWG 7,160
1A. If you decide to pay out 60% to the employees, it will cost you:
AWG 6,000 plus AWG 1,518 (25.3% f 6,000) is total AWG 7,518.
In this case, your company will have a deficit of AWG 358 (7518 – 7160)
1B. If you decide to pay out 100% to the employees, it will cost you:
AWG 10,000 plus AWG 2,530 (25.3% of 10,000) is total AWG 12,530.
In this case, your company will have a deficit of AWG 5,370 (12530 – 7160)
Let’s assume you have a monthly payroll of AWG 10,000 (5 employees of AWG 2,000 each). Your sales dropped 50% in May 2020. You were basically closed during May 2020. The employers’ part of the social securities for your particular business is 25.3% (this varies depending on the percentage of the OV – accident insurance).
You will receive from Government (SVB):
50% of 60% of AWG 10,000: AWG 3,000
50% of 11.6% of AWG 10,000: AWG 580
The total you will receive: AWG 3,580
2A. If you decide to pay out 60% to the employees, it will cost you:
AWG 6,000 plus AWG 1,518 (25.3% of 6,000) is total AWG 7,518.
In this case, your company will have a deficit of AWG 3,938 (7518 – 3580)
2B. If you decide to pay out 80% to the employees, it will cost you:
AWG 8,000 plus AWG 2,024 (25.3% of 8,000) is total AWG 10,024.
In this case, your company will have a deficit of AWG 6,444 (10024 – 3580)
The advance for the subsidy for May 2020 will be transferred to your bank account (registered at SVb) next week. You will receive an email when the transfer has been made.
REQUIREMENTS WAGE SUBSIDY
To claim the Wage Subsidy, employers must satisfy the following requirements:
1. The company has been negatively affected by COVID-19 and must expect its sales to decline by at least 25% during the month for which the company is claiming the Wage Subsidy
2. The company may not lay off employees for socio-economic reasons
3. The company must pay its employees a gross amount of at least 60% of their SVb wages, subject to the SVb wage limit
4. The company and all its employees must have been registered with the SVb on March 15, 2020
5. The company is registered with the Tax Department and has a Tax ID number (persoonsnummer)
6. The company must be in compliance with all its payment obligations for taxes and social security premiums for the month for which it is claiming the Wage Subsidy
7. The company must submit an application for the Wage Subsidy within the deadline
Employers that applied a “no work, no pay” arrangement in April (in part or in full), with their employees possibly drawing allowances from the temporary emergency fund (“FASE”), may restart paying wages in May (in accordance with the third condition), and so apply for the Wage subsidy.
HOW TO APPLY FOR WAGE SUBSIDY?
- To apply for the Wage Subsidy, you have to fill in the application form that is available at MiSVb 2.0’s login page.
- Fill in the form completely and then click OPSLAAN (“Save”). You have until May 12, 2020 (i.e., 5 business days from today) to fill in the application form.
- Remember to grant permission to the SVb to use your company and employee data for the Wage Subsidy scheme.
- To avoid any delays in payment, employers should make sure that all their company and employee data in the MiSVb portal are up-to-date.
If you have any questions or concerns after reading this newsletter, please contact our payroll department.
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