Cares Act Update

FTE issues: May 20, 2020

Many employers are finding it difficult to re-hire old employees or hire new employees.
Between the fears associated with the Virus and the juicy unemployment benefits
available, many “would-be” employees are staying on the sidelines.

“What happens to my loan forgiveness if I cannot re-hire or replace my employees?”

Clearly, if your payroll goes down, the forgiveness amount could be reduced. There is
also a reduction in the forgiveness amount for a reduction in average FTE’s (full time
equivalent employees) compared to the number of FTE’s at a safe harbor date or two
optional measurement dates (employer’s choice). You do not have to count in any FTE
reductions for any of the following circumstances:

  • Terminated employees for cause,
  • Employees who refused to return to work after receiving an offer of the same pay
    and hours as prior to their layoff or furlough,
  • Employees who quit or retired or
  • Employees who requested a reduction in hours.

Thus, the “quantitative reduction” for a decline in FTE’s is not impacted by these
reductions in workforce. Documentation is critical for any of these exceptions.

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