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Answering Your Employee Payroll Questions Amidst Covid-19

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Small business owners are facing unprecedented times as the COVID-19 pandemic continues to spread throughout the country. Whether your business has been forced to temporarily shut down operations, shift your workspace and communication styles or completely pivot to help the community, we’re sure you’re getting endless questions from your employees about how to move forward. The big question on many employees’ minds is whether or not they’re going to continue to receive a paycheck. And, if they do get their paycheck, will it be reduced? Will it be delayed? If you need help answering these employee payroll questions, read on to learn more about the Paycheck Protection Program and how it can help your business continue to support your staff.

Employee payroll questions for small businesses

With people around the world being furloughed or laid off because of the coronavirus, it’s natural that your employees are going to have payroll questions right now. These questions are harder to answer than the more typical ones about the pay period, tax deductions, or their pay stub. Employees want to know if they can continue to support their families. Can they pay their bills?

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At the same time, you as an employer may be wondering how your company can survive the current climate. The U.S. Small Business Association (SBA) is acutely aware of the difficulties companies are facing and has created the Paycheck Protection Program to help support your needs during this time.

What is the paycheck protection program?

The Paycheck Protection Program (PPP) is an SBA loan to help businesses keep their workforce employed during the Coronavirus crisis. Essentially, it’s help from the United States to keep paying your employees. This loan has some huge benefits for companies, including loan forgiveness, if used properly.

Who is eligible for a PPP loan?

Any small business with fewer than 500 employees can apply for a PPP loan. This includes nonprofits, veteran organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors.

Additionally, any business in the hotel and food services industry that has more than one physical location and employs less than 500 per location can apply. These businesses must have a NAICS Code that begins with 72 (Accommodations and Food Services).

How do I apply and what is the process?

To apply for a PPP loan, start by downloading and completing the Paycheck Protection Program Borrower Application Form. Then check out this list of lenders participating in the program and begin the application process with your desired lender. If you already have a relationship with your bank and they are participating in the program, that would be a great place to start.

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Will SBA loans be forgiven?

SBA loans will be forgiven if all employees are kept on payroll for eight weeks and the money is only used for payroll, rent, mortgage interest, or utilities. It’s important to note that at least 75% of the forgiven amount must have been used for payroll.  For some businesses that may not be feasible so the SBA has put lenient and fair terms on the loan.

If you don’t follow the standards outlined for loan forgiveness, any payments you owe will be deferred for six months. This loan has a maturity of 2 years and an interest rate of 1%.

What costs are eligible for loan forgiveness?

This loan is really to be used for mainly payroll. The forgiveness amount is based on you maintaining salary levels for your staff. If you decrease salaries or wages, the forgiveness amount of the loan will also decrease accordingly. The bottom line is if you cut your employees wages and use the money elsewhere, you will be penalized.

It’s going to be very important for business owners to document how they spend this loan. You’ll need to prove that funds were actually used for payroll, with no more than 25% going to non-payroll costs. Additionally, you’ll need to show that the funds for payroll were spent within an eight-week period.

employee payroll questions

Partner with a Professional

Working with an accounting and tax professional can help you ensure that your documentation is in order when it comes time to apply for loan forgiveness. In these challenging times, you want to take every precaution to keep your business moving forward.

In addition to helping with common payroll questions and concerns, Paytech can also help you tackle the nuances of the Payroll Protection Program. We’ll help you answer your employee payroll questions with confidence.

Learn more about these services here.


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