UPDATED APRIL 27, 2020
By Lee Allphin, Employer Advantage Founder and Chairman of the Board
In early March 2020, the Coronavirus Preparedness and Response Supplemental Appropriations Act provided Emergency funding to federal agencies from which to build “lifeboats,” including aid for small and mid-sized businesses.
Congressional leaders have now set these lifeboats afloat in the sea of COVID-19 uncertainty. But confusion about ever-changing legislation, apprehension, and difficulty completing the necessary paperwork have kept many companies from boarding the businesses-saving lifeboats being offered to them and their employees.
“This is your captain speaking. Businesses should get into their COVID-19 lifeboats NOW!”
Timing is essential because of deadlines for when these lifeboats will be filled. It is not too late, but time is running out if companies wish to ensure they can get on board.
Lifeboats 1 and 2: Families First Coronavirus Response Act (FFCRA) was put into service on March 18, 2020, with an effective date of April 1, 2020, expires December 31, 2020. Provisions included:
1) Emergency Paid Sick Leave (EPSL)
Employees must meet one of the qualifying reasons to be eligible. Employee must be unable to work, including unable to telework, because the employee is:
- Subject to a federal, State, or local quarantine or isolation order related to COVID-19
- Advised by a health care provider to self-quarantine related to COVID-19
- Experiencing COVID-19 symptoms and is seeking a medical diagnosis
- Caring for an individual subject to an order described in 1) or self-quarantine as described in 2)
- Caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19
- Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury
Eligible employees should receive up to two weeks (80 hours, or a part-time employee’s two-week equivalent) of paid sick leave based on the higher of their regular rate of pay, or the applicable state or Federal minimum wage, paid at:
- 100% for qualifying reasons #1-3 above, up to $511 daily and $5,110 total
- 2/3 for qualifying reasons #4 and 6 above, up to $200 daily and $2,000 total; and
- Up to 12 weeks of paid sick leave and expanded family and medical leave paid at 2/3 for qualifying reason #5 above for up to $200 daily and $12,000 total
A part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period.
2) Emergency Family Medical Leave Expansion Act (EFMLEA)
The Department of Labor (DOL) continues to issue new guidance constantly.
Certain employers must provide up to 12 weeks of leave: First 2 weeks are unpaid, remaining 10 weeks are paid at 2/3 of employee’s rate up to $200/day
Qualifying Reason: To care for a child because their daycare or school is unavailable due to COVID-19.
Lifeboat 3, 4, 5 and 6: Coronavirus Aid, Relief, and Economic Security Act (CARES Act)– March 27, 2020, and updated April 2020, providing:
- Paycheck Protection Program (PPP)
- Changes to Economic Injury Disaster Loans (EIDL)
- Social Security tax credits and deferments
- Unemployment insurance expansion
For each of these lifeboats there are special provisions and conditions as to whether it is the right one for your business. The DOL encourages employers and employees to collaborate to reach the best solution for maintaining the business and ensuring employee safety. Deadlines are important for making choices and moving forward. The question for everyone is, “Which boat is the one for me?” But there is no easy answer. The lifeboats are different sizes and not all employees or businesses will fit in them.
Lifeboat #3: Payroll Protection Program (PPP)
PPP is a pivotal part of the CARES ACT and could be as important to a business today as a lifeboat was to the Titanic. As everyone now knows, the purpose of this business loan is to prevent layoffs during this unprecedented period of business shutdown, in compliance with government guidelines to stop the spread of the COVID-19. To qualify for forgiveness, employers must re-hire all employees laid off (going back to February 15, 2020), and increase their previously reduced wages, no later than June 20, 2020. It is very clear these provisions are designed to provide an incentive to employers to not lay off workers, and instead utilize the loan amounts to pay payroll and other expenses. It is urgent to file for the PPP, rehire all laid off employees, and maintain the jobs for at least the 8-week period which begins as soon as the loan is funded to your account.
A second round of funding titled “Paycheck Protection Program (PPP) and Health Care Enhancement Act,” provides more than $320 billion in additional emergency supplemental funding for the PPP program. The need for additional funding was deemed necessary when the CARES Act $349 billion PPP ran out before a large percentage of smaller businesses could take advantage of the program.
Lifeboat #4: EIDL
EIDL is an existing program with the SBA and is available during presidentially- declared disasters. The regular size and eligibility requirements for SBA loans apply. Amounts up to $2 million with a 30-year term at a 3.75% interest for small business and 2.75% for non-profits.
Lifeboat #5: Cares Act Tax Credits and Deferments
An employee retention tax credit may be available for businesses with fewer than 100 employees and didn’t receive a PPP loan. Employers can count 50% of “qualified wages” of up to $10,000 in paid wages per employee, meaning up to $5,000 of tax credit per employee to be credited to the employer portion of Social Security Tax (6.2% of wages). But it is important to read the fine print defining “qualified wages”.
For tax deferments, we are still awaiting IRS rules and guidance on how this will be implemented. The CARES Act specifies that employers can defer their portion of Social Security taxes incurred between 3/27/20 and 12/31/20 with 50% of the deferred amount due 12/31/21, the other 50% due 12/31/22.
Lifeboat #6: Unemployment Insurance Expansion
Employees who must be laid off during the crisis may receive unemployment benefits without increasing the employer liability cost in the state unemployment insurance pool. It also applies to employees with reduced hours. This was the easiest lifeboat for employees, but not the best route for an employer. Other options are much safer alternatives to keep the business afloat going into the future.
We understand that you may have additional questions. Employer Advantage is committed to keeping our clients and their employees informed with the latest information available through our free webinars and COVID-19 Resources web page.
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