The COVID-19 Crisis
Options for Employers
Last Updated: March 31, 2020
In the wake of a devastating pandemic that has impacted us all, the US government has rallied to create resources to help companies survive this crisis.
As HR experts and not tax specialists, we’ve prepared this list of resources for our valued clients but urge you to also seek help from your CPA, bank, and/or payroll company. We are finding that companies really need to look at all of the options available before deciding upon a go-forward plan. Whether you’re partially or fully open as an Essential Business, having your staff work remotely, or have had to shut down some or all of your operations, the following may be of assistance.
Please call us if you want to brainstorm about the best way to keep your business and your employees in the best shape possible during these tough times.
Family First Coronavirus Response Act (FFCRA)
- Effective 4/1/20.
- Applies to employers with 500 or fewer employees.
- Provides employees with 2 weeks of Emergency Paid Sick Leave for taking time off due to the employee being quarantined, having been advised to self -quarantine, experiencing COVID-19 symptoms, caring for another who is in one of these situations, or has a child whose school or childcare is closed.
- Provides employees with 12 weeks (initial 2 are unpaid, subsequent 10 are paid) of Expanded Family and Medical Leave (FMLA) for employees who need to take time off due to unavailability of children’s school or childcare due to COVID-19.
- Employers are reimbursed for the cost of the paid time by reducing their required deposit of payroll taxes including all federal income taxes withheld, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees (not just those who got paid leave).
- Can be reported as soon as 2nd quarter 2020 payroll tax returns (Form 941). If deposits are insufficient to cover the credit, employers can request an advanced payment from the IRS.
- Details from DOL: https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
- Details from the IRS: https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus
- Summary from Vantaggio: https://vantaggiohr.com/industry-news/dol-labor-update/
Payroll Tax Deferral
- Effective immediately.
- Applies to all businesses and non-profits.
- Employers are able to defer payroll taxes unless they receive a loan under the SBA Paycheck Protection Program.
- The employer’s portion of Social Security taxes (not Medicare and not the employee’s share of SS or Medicare) through the end of 2020 can be deferred. 1st 50% of deferral must be paid before 12/31/21. 2nd 50% of deferral must be paid before 12/31/22.
- Info: https://www.schatz.senate.gov/coronavirus/payroll-tax-deferral
Employee Retention Credit:
- Available to all employers regardless of size who do not take out an SBA small business loan.
- To qualify, the employer has to show one of the following:
Operations were fully or partially suspended due to a COVID-19 government-mandated shut-down order, OR
Gross receipts declined by greater than 50% compared to same quarter in prior year. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
- Credit is 50% of qualifying wages up to $10,000 per employee paid after 3/12/20 and before 1/1/21. Amounts are limited to cash wages but can include a portion of employer provided healthcare. Does not include paid leave benefits under FFCRA for which the employer is separately eligible for tax credits.
- For employers with less than 100 employees (average in 2019), the credit is based on wages paid to all employees, regardless if they worked or not.
- For employers with more than 100 employees (average in 2019), the credit is allowed only for wages paid to employees who did not work during the calendar quarter.
- Employers are reimbursed for the cost of the credit by reducing their required deposit of payroll taxes including all federal income taxes withheld, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees (not just those who got paid leave).
- Can be reported as soon as 2nd quarter 2020 payroll tax returns (Form 941). If deposits are insufficient to cover the credit, employers can request and advanced payment from the IRS.
- Details from IRS: https://www.irs.gov/newsroom/irs-employee-retention-credit-available-for-many-businesses-financially-impacted-by-covid-19 and https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
Paycheck Protection Program (PPP) Small Business Loans
- Available for businesses with 500 or fewer employees (for hospitality including restaurants, not more than 500 per physical location) that were operational on 2/15/20, had employees on payroll, and paid wages and payroll taxes.
- Businesses can apply beginning 4/3/20. Independent contractors and self-employed individuals can apply beginning 4/10/20.
- Loans can be obtained through 6/30/20.
- Loan amounts are the lesser of average monthly payroll costs during the prior year times 2.5 or $10 million. Payroll costs are capped at $100,000 per year for each employee.
- Loan funds can be used for payroll, employee benefits, mortgage payments, rent, and utilities. Cannot be used for paid leave benefits under FFCRA for which the employer is separately eligible for tax credits. Any amounts used for these purposes in the 8 weeks following getting the loan will be forgiven. Not more than 25% of the forgiven amount can be for non payroll items.
- Loan will not be forgiven if compensation is decreased for staff making less than $100,000 per year by more than 25% or if headcount is reduced. Employees may be rehired by 6/30/20 to preserve loan forgiveness.
- Interest rate is 0.5% fixed. No fees to apply. Loan due in 2 years. No personal guarantee. Payments deferred for 6 months.
- Info from Treasury Department: https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf
- Info from the SBA: https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
Pandemic Unemployment Insurance Assistance
- Available to individuals who are unemployed, partially unemployed, or unable to work between 1/27/20 and 12/31/20 for the following reasons directly related to COVID-19: diagnosed with, experiencing symptoms of, having a family member with, or caring for a family member with the disease; caring for a child whose school or childcare is closed; unable to reach the place of employment due to a quarantine; ordered to self quarantine; unable to commence a job or reach the job; became the breadwinner due to the head of household dying; has to quit a job; or has a place of employment that has closed.
- Employees still apply to their state unemployment office and if eligible for benefits will receive an additional $600 on top of the amount allowable under state law up until 7/31/20.
- Total length of unemployment is increased from 26 weeks (max in most states) to 39 weeks.
- Also provides benefits to those normally not eligible for unemployment such as independent contractors, gig workers, and self-employed individuals.
- States are encouraged to waive waiting periods for benefits and relax the requirements that an individual be actively seeking work to be eligible for benefits.
- As this program will be administered by state unemployment offices, employers should encourage employees to apply if they feel they might be eligible. As states may retain some discretion in how this Federal assistance is applied in their location, we expect to learn more as time goes by.
- More details: https://www.nelp.org/publication/unemployment-insurance-provisions-coronavirus-aid-relief-economic-security-cares-act/
Other Help from the SBA:
SBA Working Capital Disaster Loan
- Funds from US Treasury.
- Apply direction with SBA.
- No cost to apply, no obligation to take if approved.
- Up to $25,000 unsecured.
- Automatic 12-month deferral.
SBA Economic Injury Disaster Loan
- Up to $2 million.
- Small business 3.75%, Non-Profits 2.75%.
- Up to 30 years.
- Provides an emergency grant of up to $10,000 to be made within 3 days of application. These grants do not have to be repaid as long as funds are used for:
- providing paid sick leave to EEs unable to work due to the direct effect of the COVID–19;
- maintaining payroll to retain EEs during business disruptions or substantial slowdowns;
- meeting increased costs to obtain materials unavailable from the applicant’s original source due to interrupted supply chains;
- making rent or mortgage payments; and
- repaying obligations that cannot be met due to revenue losses.
More Questions – We know everyone’s heads are spinning and are here if you need to talk. Vantaggio remains fully open for business and is committed to helping you and your employees during this unprecedented time.