VRS continues to monitor the situation in an effort to help our clients make the best possible decisions through this difficult time. Things are changing daily, so please make sure to check our most recent communications and posts on our website for the most up-to-date information. A message we put out a week ago may have changed.
We had a great conversation yesterday with Dusty Johnson’s office in our efforts to learn more about the specifics involved with the Families First Coronavirus Response Act (FFCRA). In particular, we asked for clarification on effective dates of various provisions, and whether the qualifying events would be interpreted very literally or more liberally (e.g. what constitutes a government isolation order?). They promised to reach out to the Department of Labor and get back to us, but as of the writing of this update we have not received a response yet. We will forward any response we get.
Relative to the FFCRA:
- Attached is the poster that employers are required to put in a conspicuous place for all employees to see.
- The latest information from the DOL is that the law goes into effect April 1st. There is a chance they may give us an option to elect earlier application, but until you hear otherwise – April 1 is when an employee can elect to take any of the benefits under this particular bill.
- The bill does not specifically exclude owner/employees, so our anticipation is that owner/employees would qualify as well. However, many other areas of the law exclude owner/employees so we are not CERTAIN at this time that owner/employees will qualify.
- Starting April 1st, if any employees elect to take leave under the FFCRA they get the benefit of paid time off (at full or 2/3) and the employer get the benefit of the tax credit (claimed on payroll tax returns). Employers will be able to reduce payroll tax deposits to recoup the credit quicker.
- This particular bill is critical right now to keep employees on payroll, but the provisions in the Phase 3 bill will change the dynamics drastically . . . so the best thing for employers right now is to understand the various ways this COULD play out and assure everyone that you are doing all you can to take care of the situation.
Alternatives to FFCRA:
- Obviously employers can lay employees off and send them to the unemployment line. Currently unemployment is 50% of regular pay capped at $414 per week. However, this is going to increase/change under the Phase 3 bill.
- The Phase 3 bill will give employers two additional options to consider:
- Continue to pay employees during the shutdown or slow down, and claim a credit for 50% of the qualifying wages. We do not have all of the specifics yet, but this may be a good option for a business that can justify staying open on a limited basis with rotating shifts for their employees. The idea would be that employees would work something like 50-75% of their usual hours but get paid for a full week, and then the employer can claim a credit for 50% of the wages paid.
- Take out an SBA loan up to 2.5 times your average monthly payroll, and the entire loan will be forgiven as long as 100% of the proceeds are used for payroll, rent/mortgage, and utilities and you do not cut your staff or their wages. This could be a slam dunk for the business that truly needs to shut down and has an interruption of revenue and no work for their staff to do. It will require more paperwork, but it may be the best way to get both payroll AND some overhead items covered.
The Phase 3 bill was passed by the Senate but still needs a vote by the House. So until that happens, everything we have mentioned on Phase 3 is subject to change.
Unfortunately we have to just walk through the analysis one step at a time and make decisions based upon the best information we have available on that day. If your business is positioned to kick the can down the road another week – we will know a lot more. If cash is getting tight, you can always consider temporary layoffs with the intention of bringing the employees back once we get more answers. One of the most recent drafts of the Phase 3 bill included a “cure period” where employers could bring fired employees back on the payroll if they were applying for the SBA loan option. So while nothing is written in stone, the good news is that Congress appears to understand that employers are making major decisions now and will need some time to get into compliance with the various terms of the bill. No promises – but it looks like we will be getting options soon.
Certified Public Accountants & Consultants