1. Coronavirus Aid, Relief and Economic Security Act (CARES)

The key element for small companies is the Paycheck Protection Program via a small business loan that will be forgiven. We are all waiting for the rules to be written and published so we can know how to exactly administer these programs. This is very typical upon signing Acts in place. This act was signed into effect late Friday March 27, 2020. The final instruction will be published later. However below is a good outline as to what we know about some of the Act’s details.

Elements known today on the Small Business loan:

• Small businesses with less than 500 employees are eligible to receive loans up to a maximum loan amount equal to the lesser of the sum of:
  – 2.5 x the average total monthly payments by the applicant for payroll costs incurred during the one-year period prior to the date on which the loan is made; plus
  – Any outstanding amount of a loan made during the period beginning on January 31, 2020
• Entity must have been in operation as of February 15, 2020.
• Loan forgiveness is for payroll costs, group health care cost, mortgage/lease obligations, and utility payments during the eight weeks following approval of the loan (the covered period).
• Make sure when applying for these loans you confirm it is a small business loan with the provision of forgiveness.
• This Act will not cover employees with salaries over $100K annually. Waiting for the final ruling since there may be an ability to reduce wages below that level if not more than 25%.
• As of 3.29.2020 the IRS has not published how this will work administratively.
• As of 3.29.2020 the banks have not received guidance or enrollment procedures on how to apply for the SBA loan to ensure the forgiveness.
• Make sure you are not applying for the emergency loan that you must pay back.

2. Retirement 401K/IRA Plans

• These changes appeared in the CARES Act and full details are yet to be published.
• Currently waiting for full implementation guidelines and administration rules.
• Without penalty an employee can loan themselves $100K vs. the current limit of $50K; however, their company needs to amend their plan (50% rule still in affect).
• Minimum distributions will be relaxed (waiting for details).
• Distribution requirements will be relaxed on drawing out up to $100K if eligibility terms are met on COVID-19 such as being laid off, sick with the virus etc.

3. FMLA for small Businesses (under 500 Employees)

There are several different benefits under the provision of the Family First Coronavirus Response Act (FFCRA or Act) and are broken out down below:

General Guidelines:

• Employers will receive two-thirds to 100% reimbursement for paid leave pursuant to the Act.
• Employers will get paid via Payroll tax credits and based on leave needs which is outlined below.
• Businesses under 50 employees can request an exemption to provide the leave under this Act where the viability of the business is threatened.
• Items in this Act will apply from April 1st forward.
• If a business has or has developed a paid leave plan for COVID-19 in the past month, that policy must be exercised prior to using this Act’s provisions (unless overwritten in final instructions).
• There is no relief or funding for leave taken prior to April 1, 2020.

Paid Leave for Child Care or Caring for one that has COVID-19:

This is part of the Family First Act for an employee that cannot come to work because the employee’s child’s school or day care is closed, or they are required to be home caring for a COVID-19 family member. Therefore, the employee will be paid per the guidelines below:

• Employer is required to pay this benefit to the employee.
• This Act goes into place on April 1, 2020, thus any actions of employees prior to that time will be under the company’s current policies of PTO/Sick/Vacation/Personal Leave, which should be formally written out in the employee handbook.
• Currently, there is no retroaction of this act before the 4/1 date.
• The 1st two weeks are unpaid, or the employer may allow the employee to take PTO, vacation or sick leave this employee has established in regard to the allotted amount outlined in the company.
• Thereafter, the following 10 weeks will be paid (after the 1st two weeks of elimination period for the federal plan) by the company at two-thirds of the regular wage, up to $200.00 per day for a total aggregate of $2,000.00.
• Under guidelines provided on April 1, 2020 the employer will be granted a credit from payroll taxes paid. If there are not sufficient taxes, accelerated payment from the IRS will be available.
• Details will be available on April 1st explaining tax credits to maintain the employees benefits during this time.
• Employers are encouraged to set up a new paid leave code in the payroll system for keeping this expense separate for reporting reasons to get appropriate tax credits.
• The Qualifying reasons one gets paid under this childcare provision or other person’s care provision are:
• Is caring for his or her child whose school or place of care is closed (or care provider is unavailable) due to COVID-19 related reasons; or
• Is caring for an individual subject to a Federal, State or local quarantine or contains an isolation order, has been advised by a health care provider to self-quarantine related to COVID-19 or is caring for an individual subject to an order.

Paid Sick Leave:

• Paid Sick leave is permitted if an employee is unable to work because of COVID-19 concerns such as:
• Self-quarantine advised by a healthcare advisor, told to do so by a Federal, State or local government quarantine or isolation order.
• Has symptoms and is seeking medical diagnosis.
• Is experiencing any other substantially similar conditions specified by the U.S. Department of Health and Human Service.
• Employer must pay full wages for up to two weeks.
• Maximum payment is $511.00 per day.
• This Act goes into place on April 1, 2020, therefore any actions of an employee prior to that time will be under the company’s’ current policies of PTO/Sick/Vacation/Personal Leave.
• Currently, there is no retroaction of this ACT before the 4/1 date.
• Under guidelines provided on April 1, 2020 the employer will be able to take a credit from payroll taxes paid. If there are not sufficient taxes, accelerated payment from the IRS will be available.
• Details will be available on April 1st on tax credits to maintain employee benefits during this time.
• Once again, employers are encouraged to set up a new paid leave code in the payroll system for keeping this expense separate for reporting reasons to get appropriate tax credits.

4. Furloughs and Lay-Offs

If you must reduce staff:

What is the difference between laying a person off versus a furlough?

Furloughs are where the employer agrees to continue to pay both the employee and employer benefits during a set period of time; for example: 2 weeks or even 2 months. Employees should receive a letter from the employer stating the terms and conditions of the furlough including the anticipated timeframe.

• Provide a letter to each employee.
• A furlough timeframe can extend the furlough time. A new letter of terms should be prepared and sent out at that time.
• If you first Furlough an employee, in the future, you can Lay Off an employee. Normally you would use this option if the time period is prolonged and you cannot afford paying the benefits anymore.

 

• A Full Furlough is a complete stop of all work of non-exempt employees and/or exempt employees. Non-exempt employees cannot do any work, including answering emails.
• Each state has different guidelines, so become familiar with those for each state in which you have employees.
• For various states you will need to log in and establish unemployment (UE) for the Full Furloughed employees.

 

• A Partial Furlough is a reduced schedule. Some examples include working 25 hours a week, or the employee doesn’t come in for the next three days, or only works M-W-F, etc.
• For employees with partial furloughs, the employer will need to enter hours at the end of each week through the DOL site (based on the business’s state’s guidelines). The employer should set up an online account for the FID Entity.
• Non-exempt employees still must clock in and out to keep accurate records.
• This data entry of hours worked is how the DOL will pay the partial Unemployment payments for these employees.
• Each state has different guidelines so becoming familiar with those for each state in which you have employees is important.

A Lay-Off is letting an employee go with the intent of not having that employee come back to work for the company in the unforeseeable future. Consider the months ahead and if that employee is of value and worth bringing back to work. If not, in this case you would lay the person off. You cut the cord in paying benefits, releasing them for any employee status with your Company.

• Employers may also use this method if you cannot afford paying for the employee and Employer portion of the insurance.

Methods For Determining a Lay-off or Reduction of Hours:

First, and foremost, you want to break down your business functions as to Operational needs. Let’s look at a Company which is an essential business. For example:

• We suggest you look at an entire department you need to stop all together. It may be a department that is no longer generating revenue; therefore, suspend operations that are not part of your essential business. Unfortunately, first on the list are those individuals.
• Next, look at your other operational needs like your front office staff. If your doors are now closed, then you do not need those employees. If you are only seeing 75% of your customers, then suspend 25% of your workforce for each position affected.
• Same holds true for your other departments. From here analyze how many employees you need to drop off your payroll cost.
• Determining your approach to keep work streamlined, fair and not expose discrimination in setting schedules that may be reduced or needing some Furloughs. The Four normal options for selecting individuals are:
  – Ask for Volunteers to reduce their schedules or Furloughs
  – Performance – prepare a current assessment on all individuals, and place in order of performance. Obviously, those on a written warning need be let go 1st
  – Last in, first out (LIFO) rule
  – Seniority, long term employees are let go 1st (but watch out you may be selecting your most experienced staff). However, in these challenging times they may want to stay home for a while.

5. Unemployment (UE) Rules

• The normal one-week elimination waiting period is waived, so employees will collect a 1st week UE check.
• Based on compensation level of the individual you will receive a state UE amount between $45-$330 per week. On top of that, the individual will get another $600.00 per week for up to 39 weeks.
• Partial UE will be provided.
• Employer must enter each person’s data into their State DOL account.
• Most employers do not have the on-line account set up, so they will need to do so immediately.

Written by Jim Cichanski, CEO, Flex HR, Inc.
Flex HR specialists serve thousands of different organizations, in countless industries, with company sizes varying from a few to over 75,000 employees. They offer many levels of services including HR consulting, outsourcing (HRO), compliance, recruiting & talent acquisition, training & development, and onboarding administration.

Flex HR serves almost every industry in all 50 states, including Georgia, Florida, California, North Carolina, and Tennessee, as well as Puerto Rico, the Virgin Islands, Canada and Europe supporting U.S. subsidiaries of foreign owned companies.

Our Flex HR specialists serve thousands of different organizations, in countless industries, varying from a few to over 75,000 employees.

To Learn More about Flex HR Contact Us.

 

* Statistics and government guidance are rapidly changing. This is the most updated information as of the morning of 3/31/20. Small business is defined as under 500 employees.