It remains uncertain how the massive increase in unemployment claims due to the COVID-19 crisis will be handled financially. Business owners and PEOs have concerns that the state unemployment (UI) funds will increase each operating company’s associated SUTA experience rate dramatically in the future.
Recently passed legislation for THE CARES ACT may make the best financial option to not release employees and then encourage them to file an unemployment claim. This legislation provides $350B in forgivable loans and allows business owners to retain their workers and ensure that those employees continue their compensation. It’s good for small businesses and their employees
With the passage of THE CARES ACT it may be financially in the best interest for the business owners and the employees to retain the employees on the payroll and use provisions in THE CARES ACT to be reimbursed for those paid wages during the crisis. In addition, most employee wages will exceed the compensation amount available via unemployment.
Highlights of THE CARES ACT
Begin by applying through a Small Business Administration (SBA) participating bank. Act by June 30, 2020.
They will require an affidavit be signed attesting to the business being adversely affected. Causes can include: a decrease in gross receipts or customers, business closure, staffing problems and supply chain disruptions.
Eligibility requires that the business have less than five hundred employees. Eating establishments may apply with less than five hundred employees per location.
The loan must be used for payroll, mortgage interest, utilities or rent. The loan will be forgiven if used to these purposes and such can be proven with documents and receipts. Loan amounts not used for the listed purposes will not be eligible for forgiveness and will be become a ten-year loan at a maximum interest rate of four percent.
Business using a Professional Employer Organization (PEO) should contact their assigned representative to get the appropriate payroll records and to receive advice on how the program can help them sustain their company.