Unemployed: you could start a business on WW benefits

If you lose your job, you have the option of starting your own business while part of your income remains secure and predictable. For example, by making use of the UWV scheme for starters, or the reduced benefits scheme (‘urenkorting’). Read all you need to know about starting a business on an unemployment benefit ('Werkloosheidswet', WW).

Research by the Employment Insurance Agency UWV shows that every year 40,000 to 50,000 recipients of WW (unemployment benefits) start their own business. How do you prepare, and which conditions do you have to meet? Entrepreneur Marco in ‘t Veld shares his experiences. He was dismissed a day prior to the end-date of his contract. One day later, the first lockdown was announced. UWV advisor Bas Koorndijk helped him start his own business.

Starting a business with WW: 3 ways

You can set up a business while on WW benefits in 3 ways:

1. Use the UWV start-up period

After a research period of 6 weeks you can use the start-up period. You focus on your business and keep part of your benefit. The WW benefit is 70% (75% in the first 2 months) of your last salary. If you make use of the start-up period, this is reduced by 29%. This leaves you with roughly 49%. The start-up period lasts for 26 weeks. You are exempt from the duty to apply for jobs during this period.

2. No start-up period, on reduced benefits (‘urenkorting’)

To make use of this scheme you do not need permission from UWV. You do have to report the hours you spend on setting up your business to UWV. They will reduce your WW by the number of hours you have reported. All hours count, those spent directly on setting up your business and those spent indirectly (such as administration). You do still need to apply for work.

3. Without WW

You start working as an independent entrepreneur, without receiving a WW benefit. Discuss this with your UWV work advisor first.

Research period

If you are not ready to start your business just yet, you can request a research period at UWV. During this period you write your business plan and research the feasibility of your idea (is there a demand for your product/services?). You do not have the duty to apply for jobs during this period, as you will need all your time to focus on your research and plans. You gather information, find out which types of insurance you need, and chart your finances.

Tip! Take the Netherlands Chamber of Commerce ‘KVK Krachtmeting’ (in Dutch) to find out if you have the skills you need to become a successful entrepreneur.

Rules during the research period

What are you allowed to do during the research period, and what not? You are not allowed to advertise or try to find customers yet. You cannot launch your website. In short, you are not allowed to pursue business activities. If you do anyway, you can no longer use the start-up scheme.

A viable idea

Prepare well to do well. Write a business plan to gain insight into your business skills, goals, market position, and the feasibility of your idea. A business plan is good to have if you need to involve external parties, such as investors or banks. UWV also requires that you present a plan. They recommend you use this template, which you can download from the website of microfinancing organisation Qredits. Several banks also offer template business plans.

Your business plan is the translation of your ideas into concrete plans. It consists of a part in which you present yourself, a marketing plan, and a financial plan. In the marketing section you present the outcome of your market research: is there a market for your idea, and who is or are the target group(s)? The financial plan covers whether your idea will yield enough money to make a living.

Bas Koorndijk, UWV work advisor, helped Marco in ‘t Veld get started as an entrepreneur on his WW benefit. In ‘t Veld shares: “My business plan was really elaborate, because I had written it to attract investors. I had already done my homework, extensive market and sector research, and a calculation to see if my plans were viable. But UWV helped me adjust my plan, so it became even better. The scope of the plan was very broad in terms of target groups and services. Bas gave me tips to help me focus, and UWV approved my adjusted plan.”

In practice

In ’t Veld made use of the research and start-up period offered by UWV. “Everything went really fast, so much so that I was afraid I was going too fast for UWV. I wanted to skip the research period, because I had already drawn up a business plan 2 years earlier. I decided not to start my own business then, because I was offered a job in IT. But my heart is in the logistics sector.”

“Making my own decisions, being independent, really appeals to me. I wanted to get started as quickly as possible, and thought I would make use of the reduced benefits scheme. But Bas advised me to go for the 6-month start-up period. That way, I was still entitled to income during 6 months. The reduced hours scheme can cost you a lot of income if you invest more and more time in your business, without necessarily seeing a financial return.”

“By making use of the start-up period, it became irrelevant how many hours I spent on my business: it does not affect the amount of benefit you receive. And in the end, making the decision and finally registering my business took less than 3 weeks.”

Koorndijk: “The start-up period is also often called the start-up scheme, or ‘startersregeling’ in Dutch. That can be confusing. The official term is start-up period (‘startperiode’). To make use of this arrangement, you always need approval from your UWV work advisor. Clients cannot apply for the ‘startperiode’ if they have been active as a business in the past 6 months. This is because UWV does not view such clients as starting entrepreneurs. Also, you are not allowed to take orders or assignments from your last employer during the start-up period. If you do, your WW benefit will be reduced by 100%.”

“About a quarter of all businesses starting from WW have used the start-up scheme. A business plan that shows you can make a living is a condition for approval. Your work advisor decides whether or not you are eligible for the start-up scheme. The aim of the start-up period is that the client is fully self-sufficient after 6 months, and no longer receives unemployment benefit from UWV.”

Increase your chances of success

“I started a logistics business because I know my way around this sector. With my company Field Forwarding BV, I will be targeting customers who have just started out in the logistics sector and lack experience. I see opportunities there. You have to be aware of your maximum strengths, and knowledge of the sector is a must”, says In ‘t Veld. Koorndijk confirms that your chances of success are much better if you set out in a sector you know well.

Popular sectors among entrepreneurs starting from a WW benefit are professional services, construction and timber, and financial services. In this respects they do not differ much from the average starting entrepreneur.

Find a sector that offers opportunities. Always conduct a thorough industry analysis, and find out if the market for your product or services is thriving. Get the answers to the following questions:

  • What are the new trends and developments?
  • Which rules and regulations apply to your sector?
  • How high is the average turnover?
  • Is it common in your sector to have a strong presence online?

You use the outcome of sector research to test the viability of your idea.

Start-up period or reduced benefits?

When should you opt for the start-up period, and when is the reduced benefits scheme the better choice? Koorndijk explains: “Will you be working as an entrepreneur full-time? The start-up period will most likely be the right choice for you. You give up 29% of your unemployment benefit, and you get to spend as many hours as you want on your business, plus you do not have to apply for work. You get to keep what you earn from your business. And you remain insured against disability.”

Will you be a part-time entrepreneur? Or were you already running a part-time business next to your job, and do you want to expand the number of hours spent on your business? “In that case, the reduced benefits scheme is probably the better option. Be aware though that all hours count, also those spent on acquisition and travel. Always report your hours to UWV immediately. If you do not, you risk a reduction of your benefit, or even a fine.”

Part-time business

4 out of 10 entrepreneurs starting on WW eventually combine their business with a job in paid employment. The big advantage of being a part-time entrepreneur is that, as a rule, you run less of a financial risk. After all, you do have a steady source of income. There can be several reasons to start part-time. Running a part-time business also has fiscal consequences, for instance for your income tax return and any allowances you might be eligible for.

Repaying WW benefit and the start-up period

During your start-up period, you receive 29% less unemployment benefit for 26 weeks. During this time, you have spent all your hours on your business. If you were also receiving an allowance from UWV or the Tax Administration during this time, you may have to repay (part of) this amount. The Tax Administration will make a final assessment to determine whether or not this is the case. The assessment will be based on the first 2 book years of your business. For more information, contact UWV.

70% of entrepreneurs successful after start-up period

The UWV start-up period lasts for a maximum of 6 months. After that, you decide to continue or end your business. If you continue, you must report the hours spent on your business to UWV. These hours will be offset against WW benefit you receive. Koorndijk: “The large majority of clients who use the start-up scheme continue. Over 70% are still active as entrepreneurs. A large part of these are still successful after 3 years. They do not need to fall back on their remaining claim on unemployment benefit.”

Is your business not successful during or after the start-up period, and do you end your business? If you are once again available for employment, you might be eligible for continued WW. This is only possible after the 26-week start-up period has passed. 

Register with KVK

Every entrepreneur or self-employed professional without staff has to register with KVK. If you use the start-up scheme, you need UWV’s approval first. So always ask your UWV work advisor if you are allowed to register your business with KVK.

To register, you can make an appointment online. Fill out the online registration form before you visit a KVK office to make your registration official. After you have registered, you receive your KVK number. KVK forwards your details to the Dutch Tax Administration. They will send you your VAT-ID and your VAT number by post. You pay a one-off registration fee at KVK.

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