Do you have to bring all employees back?
Not necessary. The PPP Loan requirements are based on your overall headcount, but that does not mean you need to bring all the same employees back. There is currently no requirement mandating employers to rehire the same people. In addition, if you reduce your headcount or make reductions in salaries, the forgiveness reduction penalties will still not apply to your employee wage/salaries that were documented between February 15, 2020, and April 26, 2020.
What if an employee refuses to come back to work?
The U.S. Department of Treasury answered this question in a new round of FAQ’s issued on May 3, 2020. The FAQ indicates that the Small Business Association (SBA) and Treasury, under their authority to grant “de minimis” exemptions from the CARES Act’s limits on loan forgiveness, may exclude laid-off employees from the loan forgiveness reduction calculation if the borrower offers to rehire the employees (for the same salary/wages and same number of hours), and the employees decline the offer. Additionally, the SBA’s new guidance reminds employers to advise employees that they may forfeit their eligibility for unemployment compensation benefits if they refuse an offer of rehire. This factor will become all the more important as states increasingly begin to chargeback unemployment claims against employer experience ratings.
What if I need to fire an employee for performance or conduct issues?
Nothing is stopping you from firing someone for poor performance or conduct issues while under the PPP Loan. However, if you are still within the eight-week no termination zone, you will have to notify your PPP point of contact, and it could affect your loan forgiveness in the program. After the eight weeks, you do not have to report any longer.
Is there a cap on employee compensation? If so, what is it?
Yes, there is an employee compensation cap, and that is $100,000 per employee you have. Keep in mind that higher salaried employees can still receive more, but the extra will not be subjected to the forgiveness.
What if some salaries are reduced?
If you have any salary reduction, it could lead to loan forgivingness reduction if you decreased more than 25% for any employee who was making less than $100K in 2019.
What happens if I hire more people during this time?
If you are adding to your payroll right before applying for your PPP loan, it could add to your maximum loan amount, but not by much. It is the average over the last 12 months, and it has to be done before June 30, 2020.
What about both part-time and seasonal employees; are they included in the count?
Yes, every person who you consider an employee, even those who are on temporary leave, are added to the overall count.
Can you increase employee’s pay during the forgiveness period, such as bonuses?
Though a decrease in wages more than 25% will decrease your forgiveness for a person who was making less than $100k in 2019, the current guidance allows you to increase pay as long as it is short term, such as hazard pay or a bonus.