ABA Banking Journal reported last night that the SBA has updated its Payroll Protection Program FAQ confirming that PPP “borrowers who attempt to rehire employees that were laid off will not have their loan forgiveness amounts reduced if those employees decline the offer to return to work”.
The exact wording of FAQ #40 is here:
This is huge news for some of my clients who run restaurants, cafes, retail, and other types of businesses where working remotely is not an option, and where working conditions are cramped and staff are unable to maintain 6-foot social distancing. Understandably, some employees are hesitant to return to a job that puts their health and the health of their families and communities at risk, especially if those staff members or their loved ones are immuno-compromised.
There has been a lot of political talk about this situation, criticizing furloughed employees for this choice, but let’s all try to remember that the only folks making more money on unemployment are generally earning less than $45,000 annually — and these are the people we’re asking to put their lives in danger for our economic benefit. It’s not exactly a fair criticism, in my opinion.
That said, it certainly negatively affects the small business owners I serve, and I have been challenged by these dual needs pulling my heart in opposite directions, as I can empathize with both perspectives. The business needs to spend 75% of the PPP funds on payroll, and maintain 75% of the prior full-time-equivalent hours for their staff. So if staff are unwilling to return, then the entire PPP forgiveness is put at-risk.
This new FAQ lifts that burden for employers, which I applaud. It does make it clear that the unemployment benefits for those employees may be in jeopardy as a result, but at least the owner does not have to shoulder the burden of being the bad guy who reports them (at least, not according to this FAQ — state unemployment laws may have other requirements).
Two recommendations for business-owners who receive PPP funds and are challenged by this situation, where former employees do not want to return to a risky work environment because they are making enough on unemployment:
- Offer returning staff a hazard-pay bonus to make it worth the risk. Obviously this isn’t an option for those who are immuno-compromised, since no amount of money is worth their life; but for everyone else, consider increasing their pay temporarily with weekly retention bonuses. This will increase company loyalty, help meet the 75% payroll rule for PPP forgiveness, and assist in rebuilding the business. You can easily set up a “Hazard Bonus” payroll item in your payroll software.
- Point out to staff that returning to work will leave them additional unused weeks of unemployment pay for future use, if the business ends up having to close again after the PPP funds are exhausted.
Finally, some good news. Awaiting further guidance on PPP forgiveness and will be posting more as I learn more.
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