NSSO publishes guidelines on calculation maximum supplement to unemployment benefits
06 Apr 2020
More employees than ever before are currently enrolled in the system of temporary unemployment, which was significantly simplified for all cases of temporary unemployment resulting from the Covid-19 pandemic. Employees who are temporarily unemployed are no longer entitled to their normal salary, but will receive unemployment benefits instead. Specifically for cases of temporary unemployment due to Covid-19, these unemployment benefits have increased to 70% (instead of the usual 65%) of the employee’s capped gross salary (cap currently set at EUR 2.754,76 gross per month).
Some employers opt to pay their employees who are enrolled in the system of temporary unemployment a supplement to their unemployment benefits, to try to mitigate the financial impact of the unemployment. Such supplements can be awarded free from social security contributions, as long as the employee’s net unemployment compensation (unemployment benefits + supplement) doesn’t exceed his normal net salary. These supplements are, however, taxable.
On 2 April, the National Social Security Office (NSSO) updated its Administrative Instructions with guidelines on how to calculate the maximum supplement to unemployment benefits. Most importantly, the NSSO explains how it will interpret the above condition that the employee’s total “net” unemployment compensation (unemployment benefits + supplement) cannot exceed his normal “net” salary. “Net” in this respect - according to the NSSO - does not mean that the net amount of the salary, unemployment benefits and supplements must be taken into account but rather that, preferably, the gross taxable amounts are taken into account in this respect. Taking into account the gross taxable amounts evens out the fact that different withholding tax rates are due on the several amounts involved in the comparison.
The NSSO also states that, when determining the amount of the supplement to unemployment benefits, the employer must treat all employees belonging to the same category equally (e.g. by compensating all employees up to a certain percentage of their normal net salary). With respect to the normal salary that cannot be exceeded by the combination of the unemployment benefits and the supplements, the NSSO details that this normal salary must be understood as the salary on which social security contributions are due. As such, when determining the maximum amount of the supplement vis-à-vis the normal salary, benefits such as meal vouchers cannot be taken into account. In addition, when the employee’s salary is partly variabel, the NSSO states that the employee’s average salary of the last couple of months can be taken into account.
When determining the maximum amount of the supplement to unemployment benefits, the NSSO recalls that the employer must not only take into account the employee’s unemployment benefit as such, but also other supplements the employee may already be entitled to in this respect (i.e. the Covid-19 specific daily supplement of EUR 5,63 and possible supplements that are included in industrial arrangements).
Finally, given the nature of the current circumstances, the NSSO would allow that - if it would appear that a supplement paid out for the month of March exceeded the maximum threshold - the employer compensates this excess by decreasing the supplements of the coming months accordingly.
If you have any questions regarding the possibility of paying your temporarily unemployed employees a supplement on top of their unemployment benefits, don’t hesitate to reach out.
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