April 17, 2020 Coronavirus en_US Find out if you're eligible for a Paycheck Protection Program loan if you've laid off employees. This article explains the criteria for qualifying. https://quickbooks.intuit.com/cas/dam/IMAGE/A4rnwGzh6/laid-off-employees-PPP-md.jpg https://quickbooks.intuit.com/r/coronavirus/paycheck-protection-laid-off-employees/ Can I get a Paycheck Protection Program loan if I've laid off employees?
Coronavirus

Can I get a Paycheck Protection Program loan if I've laid off employees?

By Danielle Higley April 17, 2020

If you’ve laid off employees due to the coronavirus between February 15, 2020, and June 30, 2020, you may still qualify for a forgivable loan through the Paycheck Protection Program (PPP) if you meet certain requirements. Additionally, if you return employees and wages to their pre-February 15, 2020 levels before June 30, 2020, you may avoid having any loan forgiveness reduced.

The Paycheck Protection Program is part of the larger government stimulus package. Loans through the Paycheck Protection Program are meant to minimize the number of unemployed persons by helping eligible business and organization owners cover payroll costs and certain operating expenses.

If borrowers meet certain requirements, their loans may be forgivable, in whole or in part. One of those requirements has to do with rehiring employees who’ve been laid off. Here are a few things you’ll want to know if you’ve laid off employees recently as a result of COVID-19.

How your PPP loan forgiveness may be affected

Your potential loan forgiveness may be reduced if you employ fewer people on average in the eight weeks after you receive a PPP loan compared to specific lookback periods set by the CARES Act.

Specifically, to calculate your potential reduction in forgiveness, you will be asked to compare the average number of monthly full-time equivalent (FTE) employees you employ during the eight-week period after you receive your loan with the average number of monthly full-time equivalent employees you employed during one of the following lookback periods:

  • February 15, 2019, to June 30, 2019
  • January 1, 2020, to February 29, 2020

Most businesses can select which lookback period they prefer to use for the comparison, but seasonal businesses have to use February 15, 2019, to June 30, 2019.

For example, if you employ on average eight people a month during the eight-week period after you receive your loan, but you employed on average 10 people a month between February 15, 2019, and June 30, 2019, your potential loan forgiveness would be reduced by 20%. That’s because you currently employ on average 20% fewer workers than the lookback period.

The amount of loan forgiveness will not be reduced based on a reduction in employees between February 15 and April 26, 2020, if the reduction is reversed by June 30, 2020.

4 tips for rehiring employees by June 30

  1. Communicate as much as possible. You might not know what will happen after June 30, and that’s OK. You may find your employees would rather their employer be transparent, even if they don’t have all the answers.
  2. Accommodate health restrictions. If an employee is ill or caring for a family member who is ill, you can still rehire them. Just be flexible with their time until they can come back in good health. If an employee is concerned about contracting COVID-19 at work, consider alternative work arrangements. You may also allow the employee to go negative on their sick time.
  3. Continue to observe city and state mandates. If your city or state has enacted a shelter-in-place order, you might be wondering where and how your employees will work. If you can, explore creative solutions that involve working from home. It may be advisable to allow employees to use sick leave and other paid time off if remote work is not possible.
  4. Consult the experts. If you’re hoping to apply for loan forgiveness, it might help to talk to your lender, HR personnel, or an employment law expert. Find out if you need any specific forms or paperwork when rehiring employees.

The resources described above are made available to businesses within the United States of America.

COVID-19 relief programs are evolving regularly. Please visit SBA.gov for the most up to date information.

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

Given the large demand for limited SBA authorized funding, not every qualified Paycheck Protection Program applicant will receive a loan.

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Danielle Higley is a copywriter for TSheets by QuickBooks, a time tracking and scheduling solution. She’s been a contributor to MSN.com, FiveThirtyEight, and a variety of HR and business blogs where she can put her affinity for long-form storytelling to best use. Read more