PAYCHECK PROTECTION PROGRAM:
Before You Raise Pay or Give Bonuses
In informal guidance from a local SBA office, it was indicated in response to a question that employers should not increase compensation (e.g. rate of pay) for its employees (whose compensation is sought to be paid with the Paycheck Protection Program loan proceeds). They also advised that if you’ve furloughed employees, one or more of whom decline to return*, you are permitted to hire a replacement but must pay such replacement employees at the same rate of pay. If, as a result of employees’ refusal to return, you have excess loan funds remaining, the local district SBA representative has stated that you may return the funds when you complete your reconciliation with your lender or you may take the remaining funds and carry the same as a loan, subject to 1% interest and for costs permitted to be paid for with the loan proceeds.
This appears to signal a further tightening of the program – and is in spite of the prior statement set forth in and the SBA/Treasury’s response to Q32 of the frequently updated FAQs (should be reviewed in light of that, notwithstanding their previous statement) that:
“Payroll costs includes all cash compensation paid to employees, subject to the $100,000 annual compensation per employee limitation.”
This statement should be now be considered in light of the informal guidance set forth above, unless and until further official guidance is issued by the Treasury Department and the SBA.
Further guidance on forgiveness is expected.
*Please be reminded that your offers of rehiring must be in writing and you must document the refusal to return. Please see the previous blast regarding this guidance.
Our team can be reached 24/7 if there are any questions during this unprecedented situation. To discuss issues specific to this article, please reach out to Salvatore Schibell CPA 732-539-7328, [email protected]
We wish you all the best in light of the various challenges and pressing issues many of you will face in the coming weeks and months.