EMPLOYMENT ISSUES AFTER PPP LOAN FUNDING

EMPLOYMENT ISSUES AFTER PPP LOAN FUNDING

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Most of you who applied for a PPP loan now have the loan proceeds, which has required you to bring back employees previously laid off or hire new ones. Questions continue to roll in, mainly about loan forgiveness, so we will address some here.
To qualify for full forgiveness, PPP loan provisions require you have the same number of full-time equivalent (FTE) employees after loan funding as you had compared to either (1) the first two months of 2020, or (2) from 2/15/19 through 6/30/19. As an example, two part-time employees who average 20 hours per week each equals one FTE employee. Although you must have the same number of FTE employees, there is no requirement they be the same employees you had prior to the COVID-19 shutdown. There are numerous reasons employees may change. Maybe the employee quit or was fired prior to the shutdown. Maybe some employees refuse to come back to work. Employees can and do change jobs and employers have always hired other employees to replace them. Employee changes can also occur after loan funding. There is nothing in the loan provisions saying who you must employ.
There is no requirement that your employees must work, or alternatively, not work in order for you to qualify for the loan itself or for forgiveness. Your business can be fully operational, partially operational, or even fully shut down. If your business is partially or fully shut down, you can still make your employees work if you want. They can clean the office or equipment, organize, or do any of the tasks we employers put off because we are too busy otherwise. Of course, you can also pay them even if they don’t work. You as the employer decides the duties and level of work activity of your employees.  
Many of you have expressed concern you will not be able to spend all the loan proceeds on payroll, rent, and utilities in the eight weeks after funding. This is logical given the loan amount was based on total 2019 payroll, including bonuses paid and all the employees you had during 2019. Currently, you may be down numerous employees and may have trouble hiring new ones. That’s ok. Our advice is to do your best to spend the loan proceeds on the allowed expenses. Some options are: (1) hire additional short-term employees, (2) pay year-end bonuses now, and/or (3) give short term raises. Just remember, any amount above $15,385 paid to any one employee during the eight-week post-funding period is not counted towards forgiveness. Finally, there is no requirement you keep them employed after the eight weeks are up.
To qualify for full loan forgiveness, you must: (1) spend all the loan proceeds on payroll, rent and utilities in the eight weeks after loan funding and (2) have the same number of FTE employees after loan funding compared to periods prior (as explained above) and (3) not cut any one employee’s pay by more than 25%. However, if you don’t meet all three of these criteria you can still qualify for limited loan forgiveness. In our opinion, even limited loan forgiveness is good. The amount that is forgiven was funded by the government to pay your employees. Whatever is not forgiven must be repaid over two years at 1% interest. You can also repay the non-forgiven amount immediately to eliminate the debt.
Unfortunately, there is still little guidance provided as to the forgiveness of PPP loans. As additional guidance is forthcoming, we will provide it to you. Remember to visit our blog page at www.cpawyo.com for updates. It is impossible to anticipate every question via our email posts, so please call with your individual questions so we can go over them. Thanks, and be healthy!
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