SBA issues PPP guidance on Laid-off Employees
Many small businesses have now received PPP loans. These small businesses are now turning their attention to loan forgiveness. We wanted to bring you up to speed on some guidance that the SBA issued today that will assist in obtaining forgiveness.
Generally speaking, PPP loan proceeds have to be used 75% for payroll and 25% for rent, utilities and mortgage interest.
Loan forgiveness can be reduced by a proportional decrease in full-time equivalent employees and a proportional decrease in salaries in excess of a 25% reduction.
According to the SBA guidance issued today, laid-off employees can be excluded from loan forgiveness reduction calculations if the employees turn down a written offer to be rehired. The SBA also warned that employees who reject offers of reemployment may find themselves ineligible to continue receiving unemployment benefits.
So, a strategy for businesses that have received a PPP loan may be to:
Ask a laid-off employee to take their job back at a 24.50% reduction in salary
If the employee says NO, offer them the full salary
If the employee still says NO, the business will be given “credit” for hiring them back.
We hope you found the above helpful. And again, we are available if you have questions, concerns or need assistance.