Are you a recipient of a PPP loan and can’t get your employees to return? Well, here’s what you should know.
At the onset of this unprecedented COVID-19 pandemic, many small business owners were forced to make the difficult decision to lay off their workforce. With business closures and restrictions running rampant and lack of funds to meet their payroll and overhead obligations, small businesses reduced their workforce in an effort to survive in the initial stages of this health crisis.
The CARES ACT Providing Assistance to Small Businesses & The Unemployed
In the few weeks following the initial stage of this pandemic, Congress enacted the Paycheck Protection Program as part of the CARES ACT in an effort to provide relief for small businesses and encourage business owners to keep their staff on payroll during these financially challenging times. If you applied for the PPP loan for your business and were approved you may be facing some new challenges that you may have not been expecting.
Under the same CARES ACT where congress provided small business owner’s relief through paycheck protection loans like the PPP, there was also assistance provided for individuals that have lost their employment due to the COVID-19 pandemic including a $600 per week payment in addition to any state unemployment benefits the individuals may be entitled to.
Additional Unemployment Benefits Creating a Division Between Employers & Their Staff
This additional federally backed unemployment assistance has created an unexpected obstacle for small business owners who have been approved for their PPP Loan and are now seeking to have their workforce back in action for their business. In some instances, individuals are now making more per week with unemployment benefits than what they would be making in their former position and might be refusing to return to work for your enterprise.
Due to the provisions of the PPP Loan, it is imperative that your small business use between 60 — 75% of the funds for payroll purposes in order to qualify for the forgiveness benefits of the loan. If your workforce is refusing to return to work then this may appear to pose a risk to your business’s ability to seek forgiveness of the loan in the future. While there is some extra work involved for your small business, the refusal of your staff to return to their prior positions does not preclude you from seeking forgiveness of the PPP loan.
Meeting the Requirements for PPP Loan Forgiveness
In order to ensure your business meets all the requirements of the PPP program below are suggestions on how to approach the challenge of individuals who may be refusing to return to work:
- First and foremost any offer to return to employment MUST be done in writing and refusal of the employee must be documented by the business.
- Employees should be advised that refusing an offer of re-employment could jeopardize their unemployment assistance eligibility.
More Flexible Provisions for PPP Loan Forgiveness
Fortunately, in recent weeks congress has offered guidance on several aspects of the PPP Loan Program as well as modifying a number of provisions making the forgiveness of these loans easier for many small business owners such as yourself.
- Payroll expenditures may now be as low as 60% of the funds disbursed through the program
- Businesses may request extension of the 8 week period for use of the funds to 24 weeks if more time is needed to use the funds.
- Loan repayment options have been extended for up to 5 years for new borrowers as opposed to the initial 2 years for any portion of the loan that is not forgiven.
If you have received a PPP loan but are struggling with individuals that are refusing to return to work you are still entitled and able to seek forgiveness for the PPP loan so long as you have met the requirements of the program and documented your efforts to rehire your prior staff. There is no need to continue to haggle with employees refusing to return to your company. Once you have made a written offer and documented their response, you can focus your efforts on hiring new staff and rebuilding your business.
If you have any questions, please contact us immediately! Our staff members are happy to assist, routinely going above and beyond for our client partners. Call 855.565.VSHR (8747) or email us at hr@vertisourcehr.com.