As the coronavirus pandemic continues to wreak havoc on the national economy, the Paycheck Protection Program Flexibility Act (PPPFA) provides employers with updated options for managing their loans. However, it’s important to know the best way to leverage these options and protect your company during this time of upheaval.
“Under changes to the PPPFA signed on June 5, employers will now be eligible for loan forgiveness equal to the amount the borrower spent on rent, utilities, and mortgages during the 8-week or 24-week covered period or alternative covered period,” says Rob Wilson, President of Emplocyo USA and human resources expert. “Up to 40% of payroll costs can also be covered under these loan terms.”
What is considered a covered payroll cost under the guidelines of the PPPFA?
“Payroll costs can include salary, wages, commissions, or similar compensation, sick leave or medical leave, group insurance, retirement benefits, and cash tips among other possibilities,” says Wilson. “But there are a few exceptions like compensation of an employee whose residence is out the United States.”
Below Wilson also explains the difference between the covered period and the alternative covered period under PPPFA.
“The covered period is the only option for companies with semi-monthly or less frequent payroll periods,” explains Wilson. “Under PPPFA, borrowers will have an 8-week (56 days) or a 24-week (168 days) period starting on the same day as the PPP loan proceeds were received. But companies with bi-weekly or more frequent payroll periods can fall under the alternative covered period, and have an 8-week (56 days) or a 24-week (168 days) period starting on the first day of their first pay period following PPP disbursement date.”
Here, Wilson offers his top tips for maximizing forgiveness:
Adjust your payroll schedule (temporarily) to fit within the 8 or 24-week window.
Don’t forget to include employer-paid benefit amounts in the payroll costs, including group medical, dental, vision, FSA and 401(k) plans.
Keep track of hours worked for each employee – the forgiveness is based on FT and FTE counts (based on a 40-hour workweek).
Pay a bonus or increase compensation for employees if you’re tracking too low near the end of the 8 or 24 weeks.