Paycheck Protection Program Forgiveness: Reminders About Factoring in Full Time Equivalent Employees May 8, 2020 COVID-19 We hope you are doing well and staying healthy! We want to provide some reminders and updates regarding PPP Loan Forgiveness, particularly regarding how Full-Time Equivalent (FTE) Employee counts factor in. There is still a lot that is unclear about specifics of PPP forgiveness calculations, but one thing that is clear is that PPP loans will be eligible for forgiveness proportional to the number of employees retained through the 8 week period following loan disbursement. This blog article on our website offers a good explanation of how employee retention impacts loan forgiveness. A key takeaway is that businesses will need to maintain the same or a higher FTE employee count vs. the count during one of two time periods in order to achieve maximum loan forgiveness. The two time periods that can be used for the baseline determination are January 1, 2020 to February 29, 2020 or February 15, 2019 to June 30, 2019. Please read further below for information on reports that may help with determining your business’s baseline FTE Employee count and current FTE employee count. FTE Employee Count Reports Disclaimer: At present, there is not clear direction from the SBA or US Treasury on how the FTE count should be calculated. If and when guidance is given for this, we will update our reports accordingly. In lieu of specific guidance, it seems appropriate to calculate FTEs the same way the IRS instructs to calculate FTES for purposes of compliance with the Affordable Care Act, as that is the only other written regulation on the topic of FTEs that we are aware of. We have put together a report for our payroll customers that counts FTEs per month using the following formula: All salaried employees + All hourly employees with more than 130 hours in the month + (all remaining hours worked in the month divided by 130) = FTE Count This FTE report is now emailed with each payroll that you process. In addition to the PDF file that you typically receive, there will be a .zip file that contains the FTE report in excel format. The FTE report will include hours for just that specific payroll, except on the last payroll of the month.* *On the last payroll of the month, a second FTE report will be included and it will contain all hours from all payrolls processed in the month. **If you need ad-hoc FTE reports for the baseline periods mentioned above or for any other period, please send a request for the report including the date range that it should cover to support@unifypayroll.com. FTE Payroll Processing Considerations Considering the impact on PPP loan forgiveness and the reports that are available we recommend paying employees in the same way that you did before the PPP loans. By this we mean that we recommend paying hourly employees per hour, salary employees a flat salary, and commissioned employees commissions. The purpose of this consistency is so that the FTE measurements for your baseline period and for what is paid with PPP loans are the same. Additional Consideration: Factoring In Employees That Choose Not To Return To Work It may be challenging to bring back some team members that were laid off and there is some guidance from the Treasury on how individuals in this category will impact PPP loan forgiveness in this FAQs document on the PPP Loans. Question #40: “Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?“ Answer: “No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.” With this in mind, we recommend submitting written offers of employment and saving all documentation regarding the offer and any response in your records. This is a best practice at all times and may be even more important now. Here is a Recall From Furlough template that you may use. Additionally, the Colorado Department of Labor and Employment has added a form on their website where employers can report that they were ready to bring back employees but the work was turned down. This form can be accessed by selecting the “Report Refusal of Suitable Work” button on the CDOL&E’s COVID-19 Employer page.
