The rapid spread of COVID-19 (Coronavirus) across the US has growing implications for the nation’s employers and employees. Payality understands that in these anxious times that is critical that employees continue to receive their pay without interruption
We wanted you to know that even with the California Governor’s “Stay at Home” order, Payality is here for you. Over the last 2 years, we have migrated all our systems to the cloud, including our production servers, client facing payroll and time management solutions, email and phone systems. Nearly all Payality employees are now working securely from home. Because our systems are all cloud-based, employees can be contacted in the same way as before by phone, text or email. Since Payality is considered an essential service, we still have a limited number of employees at our corporate office to package and prepare checks and reports for delivery.
We will do our best to communicate pertinent information in a timely manner as it seems business rules are changing daily based on Local, State and Federal announcements.
All of Payality’s Services Remain Operational
- Payality is open and our team members are ready to help.
- Our delivery partners (Deliver It, UPS, FedEx) are open for business and plan to make deliveries as usual. Please note, some couriers will no longer be obtaining physical signatures upon delivery. They will be asking for first and last names for record purposes. This is a preventative measure to protect you and the drivers. They have asked for some patience if packages arrive later in the day than usual to due to increased delivery demands and we ask for your understanding if this occurs. If you need us to mail checks to your employee’s homes directly, please let us know so we can do so.
- If you are currently receiving printed payroll reports, we are encouraging you to take advantage of our no cost paperless option. We can send all reports, via secure connection, to our online portal. If you would like to switch to this method, please Click Here to request a login if you do not already have one.
- If we are printing direct deposit vouchers for your employees, please note your employees do have access to this in their personal and secure online employee portal. We encourage you to consider having employees access their direct deposit pay stubs online and allow us to no longer print them for delivery. Please visit www.payality.com/7ee for instructions on how your employees may register for the employee portal. We also are waiting for the Iphone APP and Google Play stores to publish our smartphone app, MyPayality in the coming weeks and will update you as soon as it is available for download.
How the CARES Act may benefit your business and employees
(based on different scenarios)
Scenario 1 – Your business is still open and you want to save as many jobs as possible but need financial assistance
The CARES Act includes $349 billion for small businesses through federally backed loans under a modified and expanded Small Business Administration (SBA) 7(a) loan guaranty program called the Paycheck Protection Program. Loans (that could potentially be forgiven) will be available through SBA and Treasury approved banks, credit unions, and some non-bank lenders. Click Here for a link to the 100 most active SBA lenders. Click Here to be matched with a Lender. Click Here for the SBA COVID-19 Resources website.
Who is eligible?
Businesses with up to 500 employees, non-profits, and businesses in the hospitality and food services industries with more than one physical location but no more than 500 employees at each location.
How much can I receive?
2.5 times average total monthly payroll costs incurred in the one-year period before the loan is made. If your business started after July 1, 2019 then it would be 2.5 times the average total monthly payroll from January 1, 2020 to February 29, 2020.
What are the requirements for receiving the loan?
The business must have been operating on February 15, 2020 and had employees who were being paid. Those requirements also include a good-faith certification that the loan is needed to continue operations during the COVID-19 emergency and that the funds will be used to retain workers and maintain payroll or make mortgage, lease, and utility payments. For clarification, payroll costs includes compensation to employees, such as salary, wage, commissions, cash, etc.; paid leave; severance payments; payment for group health benefits, including insurance premiums; retirement benefits; state and local payroll taxes; and compensation to sole proprietors or independent contractors (including commission-based compensation) up to $100,000 in 1 year, prorated for the covered period. It does exclude individual employee compensation above $100,000 per year, prorated for the covered period and sick and family leave wages for which credit is allowed under the Families First Coronavirus Recovery Act.
How can the loan be forgiven?
The principal amount of the loan (you will still owe the loan interest that is capped at 4%) used to cover the expenses listed above during the 8-week period following loan origination will be forgiven under the following criteria:
The number of full-time equivalent employees ((FTEE’s) Click Here for an FTEE Calculator) employed through June 30,2020 remains the same or higher than the average number of FTEE’s that your business had for either the period of February 15, 2019 – June 30, 2019 or January 1, 2020 – February 29, 2020 (you choose) and as long as the wages of each employee is reduced by no more than 25% compared to what they earned in the last full quarter they were employed. For example, if an employee earned $2000 per month from January 1 – March 31, 2020 then they would have to be paid at lest $1500 per month through June 30, 2020 to count as an FTEE.
If the number of FTEE’s is less, then the loan forgiveness will be reduced. For example, if you had 20 FTEE’s in the previous period and then had 15 FTEE’s on June 30th, the loan forgiveness would be 75% (15 divided by 20).
How do I apply to have the loan forgiven?
Borrowers seeking forgiveness must submit to their SBA lender the following: Documentation verifying FTEE’s on payroll and their pay rates; Documentation on covered costs/payments (e.g., documents verifying mortgage, rent, and utility payments);Certification from a business representative that the documentation is true and correct and that forgiveness amounts requested were used to retain employees and make other forgiveness-eligible payments; and any other documentation the Administrator may require. Keep in mind, the government has 30 days following enactment of the CARES Act to issue regulations on these forgiveness provisions.
Forgiveness amounts are excluded for federal income tax purposes.
How will Payality Help?
Payality is developing reporting that will determine the full-time equivalent employee counts and wages during the look back and covered periods to help simplify the SBA loan application process, calculate and maximize the loan forgiveness, and/or payroll tax credits available.
Scenario 2 – Your business was forced to close temporarily, and you already have or will lay-off most or all of your employees.
The Cares Act includes significant assistance for laid-off employees, including $600 per week for 4 months in addition to what they receive from state unemployment. To put this in perspective, an employee who is paid $12 an hour and works 40 hours per week ($480) currently (and had the same wages on average over the last 15 months) would receive approximately $240 a week (the maximum weekly benefit is $450 per week in California. Click Here for a benefit calculator) in state unemployment plus $600 per week from the Cares Act for up to 4 months or $840 per week. That is $21 per hour on unemployment versus $12 they were making while working. To put it another way, if an employee is eligible for the maximum weekly unemployment benefit of $450 from California plus $600 from the federal program, that is $1050 per week, the equivalent of $26.25 per hour.
The challenge of laying-off employees is that you must pay them for any accrued and unpaid vacation/paid-time off (you are not required to pay them accrued sick pay) and you must pay them this amount and their last hours worked immediately on the day they are laid-off.
For those employees still on your payroll as of April 1 they may become eligible for 10 days of Emergency Sick Pay or 12 Weeks of Extended Paid Family and Medical Leave under the Families First Coronavirus Response Act . Please see the FAQ’s below.
Scenario 3 – You are staying open but your revenue has or will soon drop by 50% or more but you want to keep at least some of your employees
Your business could still apply for the Paycheck Protection Program loan realizing that the loan forgiveness percentage will be decreased significantly due to lay-offs and/or apply for an SBA loan under the CARES Act expansion of the SBA Disaster loan program.
Another option is to apply directly for an Emergency Disaster Loan directly with the SBA. The CARES Act makes the following additional changes to the SBA Emergency Disaster Loan program loans made in response to COVID-19: Please note: The loan is not forgivable like the Paycheck Protection Program detailed above. Click here for more information. Waives rules related to personal guarantees on advances and loans of $200,000 or less for all applicants;
Waives the “1 year in business prior to the disaster” requirement (except the business must have been in operation on January 31, 2020);
Waives the requirement that an applicant be unable to find credit elsewhere; and
Allows lenders to approve applicants based solely on credit scores (no tax return submission required) or “alternative appropriate methods to determine an applicant’s ability to repay.”
Entities applying for loans under the Disaster Loan Program in response to COVID-19 may, during the covered period, request an emergency advance from the Administrator of up to $10,000, which does not have to be repaid, even if the loan application is later denied. The Administrator is charged with verifying an applicant’s eligibility by accepting a “self-certification.” Advances are to be awarded within three days of an application.
Principal, interest, and any associated fees owed will be deferred for 6 months.
Payroll Tax Credit
Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 per employee during the crisis. The credit would be available to employers whose businesses were disrupted due to virus shutdowns and had a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. For employers with over 100 full-time employees, qualified wages are wages paid to employees when they aren’t providing services due to COVID-19 related circumstances.
For employers with 100 or fewer full-time employees, all employee wages would qualify for the credit, whether the employer is open for business or subject to a shut-down order.
The IRS still needs to issue guidelines for how this credit will be claimed and we will notify you as soon as they are.
IMPORTANT: Employers using this tax credit will not be eligible to apply for the Paycheck Protection Program Loan
Deferred Payment of Employer Social Security (6.2%)
The CARES Act further allows for employers to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government (employers are responsible for paying a 6.2% Social Security tax on employee wages). The deferred employment tax would be required to be paid over the following two years, with half to be paid by December 31, 2021, and the other half by December 31, 2022.
How will Payality help?
Payality will release guidelines as soon as they are available on how employers can take advantage of deferring their portion of the employer portion of social security taxes when the CARES Act becomes effective.
New Guidance was issued by the Department of Labor on March 28 regarding FFCRA Leaves
We strongly suggest that employers read through the entire Questions and Answers document prior to Wednesday April 1., 2020 so they have an understanding of how the leaves work and can make staffing decisions accordingly. The following are some highlights from the updated guidance:
These leaves are not available to employees with reduced hours, furloughed employees, or employees whose workplaces are closed due to a federal, state, or local shelter-in-place or stay-at-home orders, or due to business slowdowns. See questions 23-28.
These leaves (and payroll tax credit) are not retroactive. Employees are not entitled to pay under these leaves if they were absent or out of work (for any reasons) prior to April 1. See question 1, 11 & 13.
Employers should keep documentation to show that employees who received leave were actually in need of leave. The documentation requirements will be outlined in soon-to-be-released IRS guidance. See Questions 15 and 16.
Required FFCRA Poster
The Department of Labor (DOL) has released a mandatory employee rights poster for the FFCRA. It should be posted or distributed to employees electronically (via email or online portal) by April 1. More information on the requirements can be found here.
The Families First Coronavirus Response Act (FFCRA) contains two Acts that impact Employers: The Emergency Paid Sick Leave Act (EPSLA) and Expanded Family Medical Leave Emergency Act (EFMLEA). Frequently Asked Questions and Answers for Each can be found Below:
When does the EPSLA and EFMLEA go into effect?
They go into effect on April 1, 2020 and apply to leave taken between April 1, 2020, and December 31, 2020. Leave taken for any reason before April 1, 2020 is not eligible.
Which employers are subject to the new law?
Businesses with fewer than 500 employees
Is there a small business exemption for EPSLA?
An employer, including a religious or nonprofit organization, with fewer than 50 employees is exempt when providng EPSLA or EFMLEA would jeopardize the viability of the small business as a going concern. A small business may claim this exemption if an authorized officer of the business has determined that:
The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
The Department of Labor has not issued clear guidance on how small businesses will certify that they meet the requirements for exemption. We will provide an update when they do.
Is their a grace period for enforcement?
The DOL will not bring enforcement actions against employers for violations of the FFCRA prior to April 17, 2020, provided that the employer has made reasonable, good faith efforts to comply with the Act. You can read more about the brief non-enforcement period here.
When does an employee become eligible?
The EPLSA allows an employee who is unable to work (or telework) to take paid sick leave if any one of 6 conditions shown below are met. The EFMLEA allows employees who has been employed for 30 or more calendar days oto receive extended family leave pay under reason 5 ONLY.
1. Subject to a federal, state or local quarantine or isolation order related to COVID-19.
2. Advised by a health care provider to self-quarantine due to COVID-19 concerns.
3. Experiencing COVID-19 symptoms and seeking medical diagnosis.
4. Caring for an individual subject to a federal, state or local quarantine or isolation order or advised by a health care provider to self-quarantine due to COVID-19 concerns.
5. Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency.
6. Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
Can an employee receive EPSLA if I reduce their hours?
No. But they can file an unemployment claim for the lost wages as a result of the reduced hours.
What are the pay requirements for employees taking leave under EPSLA?
The employer is required to provide up to two weeks of paid sick leave for full-time and part-time employees at their regular rate of pay who need time off for any of the COVID-19 related qualifying reasons in 1, 2 or 3 listed above or two-thirds the employee’s regular rate of pay for qualifying reasons 4, 5, or 6 listed above. Full-time employees are eligible for up to 80 hours. Part-time employee’s eligible hours would be determined by taking the average hours worked per week over the previous six months and multiplying the weekly average by two. For example, if a part time employee averaged 24 hours per week over the previous six months, they would be eligible for up to 48 hours of paid sick leave.
What are the pay requirements for employees taking leave under the EFMLEA?
The first 10 days of leave are unpaid. During this 10-day period, an employee may elect to substitute any accrued paid leave (like vacation or sick leave) to cover some or all of the 10-day unpaid period, however, the employer cannot require the employee to do so. The Employee can receive compensation under that Emergency Sick Pay Law for the first 10 days.
After the 10-day period, the employer is required to pay full-time employees at two-thirds the employee’s regular rate for the number of hours the employee would otherwise be normally scheduled, capped at $200 per day and $10,000 in the aggregate per employee.
Employees who work a part-time or an irregular schedule are entitled to be paid based on the average number of hours the employee worked for the six months prior to taking leave under the EFMLEA. Employees who have worked for less than six months prior to leave are entitled to the employee’s reasonable expectation at hiring of the average number of hours the employee would normally be scheduled to work.
How to I determine regular rate of pay?
The regular rate of pay used to calculate your paid leave is the average of your regular rate over a period of up to six months prior to the date on which the employee takes leave or the required federal, state or local minimum wage, whichever is greater. If they have not worked for you for six months, the regular rate used to calculate the paid leave is the average of the regular rate of pay for each week they have worked for you.
If the employee is paid commissions, tips, or piece rates, these amounts will be incorporated into the above calculation.
You can also compute this amount for each employee by adding all compensation that is part of the regular rate over the above period and divide that sum by all hours actually worked in the same period.
Should I pay the employees all of their accrued vacation, PTO or California Sick Pay before EPSLA?
The EPSLA takes precedence over all existing time off accrual policies, including California Sick Pay policies. The employer is not allowed to require employees to utilize their existing time off balances before paying the EPSLA.
Should I pay the employees all of their accrued vacation, PTO or California Sick Pay before the EFMLEA?
The employee may choose to receive compensation during the 10 day waiting period from their time-off accrual balances or under EPSLA.
Will I be reimbursed from the government for EPSLA and EFMLEA pay?
Employers providing EPSLA to employees under reason 1, 2 or 3 above may claim a credit of the actual amount paid to each employee capped at $511 per day (for no more than 10 days). For an employee who is provided EPSLA under reason 4, 5, or 6 or EFMLEA under reason 5 above the employer may claim a credit of the actual amount paid to the employee up $200 per day (for no more than 10 days).
How do I claim the tax credit?
Employers who pay qualifying EPSLA or EFMLEA will be able to retain an amount of the payroll taxes equal to the qualifying sick leave paid and employers cost of health insurance for all federal taxes that are available for retention including withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes due. For example, if the federal deposit liability for the payroll is $10,000 for all employees paid and you paid out $4000 in leave wages and health insurance to employees during the pay period, you would only pay $6000 to the IRS.
What if the amount I pay out is higher than the federal tax liability?
If there are not enough payroll taxes to cover the leave pay and health insurance cost, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced by the IRS soon and we will update this page when they do.
How will Payality help my business comply?
Payality will calculate the tax credit and reduce the amount collected from the client up to the amount of federal taxes owed and remit the difference, if any, to the IRS. We are still awaiting guidance on how to claim an accelerated payment should the amount of sick pay exceed the federal tax liability and will provide an update as soon as we receive the IRS guidelines to do so. Payality assumes that the credits will be reported on the quarterly returns and we will handle this for our clients.
How will I report EPSLA and EFLMEA to Payality?
Payality will be adding four new earning codes to our payroll and time management system:
CVDREG for EPSLA pay at the employees’ regular rate of pay when the employee is unable to work for reasons described in 1,2, or 3 above.
CVDCARE for EPSLA pay at two-thirds the employees’ regular rate of pay to care for a family member for reasons described in 4, 5 or 6 above.
CVDFMLA for EFMLEA pay at two-thirds the employees’ regular rate of pay, capped at $200 per day under reason 5 above.
CVDHLTH – To report the employers cost of providing health insurance to the employee on leave.
We are finalizing a user guide and it will be available on this website for download soon.
Additional COVID-19 Resources
- IRS Coronavirus Website
- Department of Labor Fact Sheet for Employers
- Department of Labor Fact Sheet for Employees
- Department of Labor Questions and Answers
- Download a Copy of the Required FFCRA Poster Here
Delay State Tax Payments
California employers directly affected by the emergency or disaster may request an extension of up to 60-days to file their state payroll reports and to deposit state payroll taxes with the Employment Development Department (EDD).
For Payality clients who wish to take advantage of this delay, we will process payroll normally but not collect the state portion of the tax liability. As the 60-day deadline approaches, we will notify you of the tax due and then notify the state to debit your bank account directly for the tax liability owed on the due date. In addition, Payality will submit the required letter to the state requesting penalty and interest relief and providing details as to why the payroll returns and/or payments could not be submitted in a timely manner as required by the statute.
Other possible short-term cash flow solutions
Suspend direct deposit for employees. We can produce paper checks for your employees. This will give the business a few extra days of cash flow.
If you require a little more cushion, we can temporarily make federal tax deposits utilizing an EFT Debit option from the IRS. If you chose this option, the taxes due will be debited from your account by the IRS on the date due rather than Payality debiting your account on or before the check date. For example, check dates falling on a Wednesday – Friday are owed the following Wednesday and check dates falling on a Monday or Tuesday are owed Friday.
Please contact our office if you would like to adopt any of these changes:
Work Sharing Program
Employers can apply for the Unemployment Insurance (UI) Work Sharing Program if reduced production, services, or other conditions cause them to seek an alternative to layoffs.
The Work Sharing Program helps employees whose hours and wages have been reduced:
- Receive UI benefits.
- Keep their current job.
- Avoid financial hardships.
The Work Sharing Program helps employers:
- Minimize or eliminate the need for layoffs.
- Keep trained employees and quickly prepare when business conditions improve.
- Avoid the cost of recruiting, hiring, and training new employees.
US Small Business Administration Loans
Federal Disaster Loans for Businesses, Private Nonprofits, Homeowners, and Renters
COVID-19 HR Resources
In recent weeks we’ve received inquiries from employers about how to manage various situations related to COVID-19. Resources and information regarding COVID-19 can be found at the Centers for Disease Control (CDC) website https://www.cdc.gov/coronavirus/2019-ncov/index.html. In addition, our HR content creators have added several important resources that are available for download and viewing below:
Click on the link below to view a recorded webinar from our HR Support Center Labor Law Attorney with COVID-19 HR Related Matters
Payality will continue to monitor the situation closely and provide any updates as the situation evolves.