How Does Covid PPP (Paycheck Protection Program) Affect Payroll?
If you’re a small business owner, you’ve probably experienced some hard times during the last year and a half. The pandemic has made life tough for business owners and employees alike. One thing you might be wondering about is how the COVID-19 PPP (Paycheck Protection Program) will affect your payroll. We are here to break it down for you.
What is the Paycheck Protection Program?
The Paycheck Protection Program (PPP) is a loan program intended to provide small businesses with cash flow assistance through federally guaranteed loans that were backed by the Small Business Administration (SBA). These loans had a maturity rate of 2 years and a low interest rate of just 1%. There are no fees and the loan can be forgiven. If it is not forgiven, payments need not be made until 10 months after the 24-week coverage period ends.
Who is Eligible for PPP?
Those eligible for the PPP loans include small businesses, sole proprietorships, independent contractors and self employed individuals. In order to receive a PPP loan, business owners must commit to maintaining an average monthly number of full-time employees equal to or above the amount they had during the previous year and 60% of the loan must be put towards payroll. Note: On May 4th, the PPP ran out of general funds and the SBA stopped accepting new applications.
What Counts As Payroll and How is the Loan Used?
Payroll includes employee salaries, wages, commissions, bonuses, tips and hazard pay. Payroll expenses also include employee benefits like vacation, family or parental leave, sick leave, medical leave and group health benefits like insurance and retirement. State and local taxes on compensation are included in payroll as well. This means that the PPP can cover just about all of your payroll expenses with the exception of payments made to independent contractors and shareholder distributions. There is a $100,000 cap per employee, so if a single employee makes over that amount it will not be covered.
How Will This Help My Business?
Having a PPP loan means that you can continue to operate your business and pay your employees, which in turn should allow your business to continue generating revenue. Not having money to pay your employees and operate your business could be catastrophic for your company and could result in loss of employees, loss of business and even business closure. These loans help to keep your business afloat through a hard time like the COVID-19 pandemic.
PPP and Payroll Management
If you have a PPP loan, it’s vital that you let your payroll management company know. They can help you to navigate through the muddy waters that come with this type of loan and ensure everything is done by the book. They will also be aware of local laws and regulations when it comes to utilizing a loan for payroll. At Coastal Human Resource Group, we know you might be struggling due to the pandemic and we want to help you however we can. Give us a call today to find out how to best manage your payroll and continue paying your employees for their hard work.