From our friends at Vital Management:
Hopefully you have recently applied for the Payroll Protection Program. This extraordinary option offers short-term relief for your company’s single largest expense. It is designed to keep your people employed and paid, even as a business slowdown tempts you to lay people off.
The program funds 8 weeks of payroll via a low-interest, 2-year “loan”. Here are some thoughts we’ve had about putting it to use. We’re pretty sure the following is program-compliant, but be sure to ask your lender for clarification. This is all still very new…
Employees Unwilling to Work
It’s scary out there – and understandable if employees don’t want to take unnecessary risk of exposing themselves. You won’t have program dollars to work with right away, so in the meanwhile you can pay them out of their PTO allowance.
Once the 8-week program is funded, you can switch the non-working stay-at-homes to program funds, and stop burning their PTO. But here’s the challenge – if you pay them full pop for not working, what’s the incentive for any employee to keep working?
Our recommend is to reduce the non-workers to a 75%-80% pay level. Working employees – even if they are working a reduced schedule – continue at 100% pay and become eligible for a “battle pay” bonus (more on that in a minute).
Other eligible expenses
The program funds 100% of payroll costs & benefits (not including federal payroll taxes) for a period of 10 weeks. The 2-week surplus – 20% of the funding total – is intended for other eligible program costs: rent & utilities (including internet & phone). If 100% of the funds provided are expended according to program guidelines, you’ll then be eligible for 100% “forgiveness” of the loan, and not have to repay a dime.
Battle-pay bonus
Because you have to spend all the money to be eligible for 100% forgiveness of the loan amount, paying non-workers 80% of normal pay creates a surplus of funds that have to be used, or repaid. We have not read anything in the program guidelines that prohibits using this surplus to employees who have worked thru the program period.
And then…
Now it’s mid- to end-June, and program funding has expired. Where are we at?
With continuing less-than-normal-revenues a distinct possibility, you need to have a plan how to manage the months ahead. We’ll share our thoughts about the plan in this week’s 3rd Thursday webinar (below) We hope you’ll join us.
Stay healthy.
Stay VITAL.
Paul & Steve
JOIN US THURSDAY AT 11A CT
This month’s half-hour 3rd Thursday discussion will focus on organizational impacts and how to best deploy personnel during and after the COVID crisis. Register here.