Amid the economic uncertainty caused by Covid-19, our office is hearing many variations on the same question: “How do I cut down on payroll costs without violating legal rights of employees?”
This is a complicated question even in the most normal of times. Now, however, with Congress setting aside billions in small business aid – which aid comes with some employee retention incentives – the issue becomes considerably more complicated.
Our law firm is carefully watching the progress of the stimulus bill on behalf of each one of our small business clients. It was passed unanimously by the Senate and set for a vote in the house tomorrow. Based on its overwhelming bipartisan support, we fully expect that it will pass, regardless of many objections voiced by many House Republicans.
This may be counting our chickens, so to speak, but we want to keep our clients informed: at this time, hundreds of billions in small business aid is to be set aside, largely in the form of low-interest loans. At the time of this reading it seems that the House is contemplating that small businesses will not need to repay these loans if the money is used to keep employees on payroll, among other purposes. As long as the business uses the loan funds for the various approved purposes delineated in the bill, and maintains the average size of its full-time workforce based on when it received the loan, the principal of the loan will be forgiven, meaning the company will only need to pay back the interest accrued. However if payroll is reduced, forgiveness will proportionately be reduced.
Everyone seems to want to know the same thing: “Should I hold off on layoffs that I desperately need? The answer is unclear at this time. We know that the amount of money each small business will get will depend on how much it paid to employees between 1/1 and 1/29. We also know that the loans will carry an interest rate of up to 4%. But on forgiveness, it states that in order to qualify, businesses will need to maintain the average size of their full-time workforce based on when they received the loan.
Obviously, the little that we know right now raises many more questions. We don’t have comprehensive answers yet, and, as always, are hesitant to issue any advice that is not strictly tailored to the unique concerns of a specific client. Nevertheless, we will do our very best to keep our clients informed.
During these uncertain times, we are committed to helping clients accomplish their objectives as quickly as possible, but we can’t ignore the countless variables that hang in the balance, especially in light of this new legislation. For that reason, if clients are contemplating layoffs, or if they believe that the above raises new issues or concerns of which we haven’t been made aware, we encourage them to please contact us to discuss options and important considerations. In these trying times, we continue to look forward. We appreciate our small business clients who have placed their confidence in our law firm. Stay healthy and safe, everyone. And whenever possible, stay at home.