Since the passage of the CARES Act on March 27th, 2020 the Payroll Protection Program (PPP) has been an extremely popular topic amongst business owners. Millions of businesses across the country have applied for PPP loans, and many have received loan funding.
However, while the PPP program is a great option for many small businesses, this doesn’t mean it is a perfect fit for all business owners. It requires that a borrower certify that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations” of their business. The SBA announced on May 6th, 2020 that if a borrower did not feel it could make that certification in good faith, then the borrower could return their loan funds on or before May 14th, 2020 without receiving any negative consequences. Moreover, complete PPP loan forgiveness may be difficult to achieve for some borrowers. Many borrowers are also uncomfortable with paying employees for work they cannot do while they are under the various stay-at-home orders in most American states right now.
Fortunately, there are alternatives to PPP, as well as some other options that may be able to work in coordination with PPP.
In Michigan, there is also Michigan Workshare Program (“Workshare”). Workshare within this state allows employers to reduce employee hours, while also allowing employees to collect partial unemployment benefits to make up a portion of lost wages. On April 22nd, Governor Gretchen Whitmer expanded Workshare eligibility to include businesses that reduced employee hours by a minimum of 10% or a maximum of 60%.
Under the Workshare program, a worker who received a 10% reduction in their hours would receive a Workshare benefit of 10% of the unemployment benefits that they would normally be entitled to. So, if an individual would qualify for $360 per week if they were fully unemployed, then a 10% reduction in wages would allow a Workshare program participant to receive an additional $36 per week Workshare benefit ($360 x 10% = $36).
As a result of the CARES Act, “partially unemployed” people can receive Pandemic Unemployment Compensation (“PUC”), which is an additional $600 per week for qualifying individuals. In Michigan, an employee who participates in Workshare is eligible to receive the additional $600 per week in PUC. This benefit lasts through July 31, 2020, unless Congress extends before it expires.
Workshare may allow PPP borrowers that do not want to pay workers for work they are not doing to still find ways to help their employees during this difficult time. Employers that participate in Workshare may see a reduction in PPP loan forgiveness, but they will still receive many benefits from participating in both programs.
Moreover, if an employer did not receive a PPP loan, or if a borrower paid their PPP loan back before May 14th, 2020, they may still be able to receive an Employee Retention Tax Credit. Created by the CARES Act, the Employee Retention Tax Credit provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19 related shut-down order, or (2) gross receipts declined by more than 50%when compared to the same quarter in the previous year. However, it is important to note that an employer who took PPP loan funds cannot also receive the Employer Retention Tax Credit. These are complicated programs, and Kemp Klein is here to help you navigate them all. Please contact us for any additional information.
For further information or questions please contact Kemp Klein.