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 online employee portal or App.
Loan Programs Available for Small Businesses
The Paycheck Protection Program is a loan offered through Banks and other SBA authorized lenders (beginning April 3rd) designed to provide a direct incentive for small businesses to keep their workers on the payroll.
SBA may forgive all or a portion of the loan based on how many employees are retained or wages restored before June 30th. The loan also must be used for payroll, rent, mortgage interest, or utilities to qualify for forgiveness. Click Here for more details about loan forgiveness and qualifications.
Resources for Applying for the PPP Loan
Click Here for the Current List of SBA Lenders
Resources for Maximizing PPP Loan Forgiveness
ALERT: May 15, 2020 SBA Releases Loan Forgiveness Application
ALERT: May 22, 2020 SBA Releases Additional Guidance on Loan Forgiveness (including changes from May 15 Guidance)
You can apply for an up to $10,000 ($1000 per employee) emergency loan directly with the SBA directly by CLICKING HERE. This is different than the Paycheck Protection Program Loan and must be used for something other than payroll, rent, and utilities.
Strategies for Managing Employee Cost
Strategy 1 – Your business is still open and you want to save as many jobs as possible but need financial assistance
Apply for the Paycheck Protection Program Loan Program with an SBA Lender 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 to search for an SBA Lender near you. Click Here for the SBA COVID-19 Resources website. Click Here for the US Chamber of Commerce Coronavirus Small Business Resources
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 1%) used to cover the expenses listed above during the 8-week period following loan origination will be forgiven under the following criteria:
Borrower calculates the total average full-time equivalency (FTE) during the chosen reference period. For purposes of this calculation, the reference period is, at the Borrower’s election, either (i) February 15, 2019 to June 30, 2019; (ii) January 1, 2020 to February 29, 2020; or (iii) in the case of seasonal employers, either of the preceding periods or a consecutive twelve-week period between May 1, 2019 and September 15, 2019.
The actual loan forgiveness amount that the Borrower will receive may be reduced if the Borrower’s average FTE employee count during the Covered Period (or the Alternative Payroll Covered Period) was less than during the Borrower’s chosen reference period, with the exceptions listed below:
FTE Calculation (This is a new SBA policy) For each employee, enter the average number of hours paid per week, divide by 40, and round the total to the nearest tenth. The maximum for each employee is capped at 1.0. A simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the Borrower.
If the number of FTE’s is less, then the loan forgiveness will be reduced. For example, if you had 20 FTE’s in the previous period and then had 15 FTE’s during the covered period, the loan forgiveness would be 75% (15 divided by 20).
FTE Reduction Exceptions
Indicate the FTE of (1) any positions for which the Borrower made a good-faith, written offer to rehire an employee during the Covered Period or the Alternative Payroll Covered Period which was rejected by the employee; and (2) any employees who during the Covered Period or the Alternative Payroll Covered Period (a) were fired for cause, (b) voluntarily resigned, or (c) voluntarily requested and received a reduction of their hours. In all of these cases, include these FTEs on this line only if the position was not filled by a new employee. Any FTE reductions in these cases do not reduce the Borrower’s loan forgiveness.
FTE Reduction Safe Harbor
A safe harbor under applicable law and regulation exempts certain borrowers from the loan forgiveness reduction based on FTE employee levels. Specifically, the Borrower is exempt from the reduction in loan forgiveness based on FTE employees described above if both of the following conditions are met: (1) the Borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; and (2) the Borrower then restored its FTE employee levels by not later than June 30, 2020 to its FTE employee levels in the Borrower’s pay period that included February 15, 2020.
Average earnings of each employee also may not be reduced by more than 25% compared to their average earnings between January 1, 2020 and March 31, 2020. However, a reduction in wages that is attributable to a reduction in the number of employee’s hours will not be counted as a reduction in compensation for the 75% or more test so that borrowers will not be double penalized for both a headcount and wage reduction.
For example, an employee earning a full-time salary of $1000 per week ($25/hour) must earn at least $750 per week ($18.75) if they continue to work full time. For hourly employees, compare average earnings per hour over the 8 week covered period to the average earnings per hour between Jan 1, 2020 – Mar 31, 2020. For example an employee works an average of 40 hours per week and earns $720 ($18 per hour average) from Jan 1 to Mar 31, 2020. In the 8 week covered period they work an average of 20 hours per week and earn $280 per week ($14 per hour average). The reduction calculation would divide the $14.00 average per hour for the covered period by the $18.00 per hour for the Jan – Mar 2020 average ($18) to determine the reduction percentage
You have until June 30th to restore wages for employees with a reduction of 25% or more between February 15 and April 26, 2020.
Strategy 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.
Strategy 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. Instead, you may want to consider the Employee Retention Tax Credit
PPP Loan vs. Employee Retention Credit Estimation Calculator
Payroll Tax Credit
Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 per employee (A maximum credit of $5000 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.
IMPORTANT: Employers using this tax credit will not be eligible to apply for the Paycheck Protection Program Loan
How do I apply for the Credit?
Businesses can apply for an advance on the Employee Retention Credit by completing Form 7200 (see below) and submitting to the IRS.
The other option for receiving the tax credit is to notify your Payality Client Support Specialist that your business is eligible and that you would like us to apply the credit each check date by reducing the federal tax deposits made to the IRS. Payality will then reduce the amount we collect from you up to the total Federal tax liability and remit the difference, if any, to the IRS. If the Tax Credit exceeds the total tax liability, Payality will provide form 7200 to you to apply for an accelerated reimbursement of the credit.
Other possible short-term cash flow solutions
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?
Notify your Payality Client Support Specialist at least 3 days prior to the check date that you would like to begin deferring the Employer Portion of Social Security payments. Payality will begin the deferral and stop collecting and remitting the deferral amount to the IRS. Payality will show the deferral amount on the quarterly tax returns using IRS guidelines (that have yet to be released).
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/State tax deposits utilizing an EFT Debit option. If you chose this option, the taxes due will be debited from your account by the IRS/State 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 NOTE: Clients choosing this option will also need to suspend employee direct deposits.
New Guidance was issued by the Department of Labor regarding FFCRA Leaves
We strongly suggest that employers read through the entire Questions and Answers page. We want to highlight the rules that will most likely affect you and your employees and describe how Payality will help.
When does an employee become eligible?
Leaves are only available to employees still employed and only for hours missed due to a qualifying event on or after April 1, 2020. If the employee is laid off, furloughed, quit, etc. before April 1, 2020 or after that date (but before they request leave), they are not eligible. (They may qualify for unemployment)
How does an employee become eligible?
The employee may be eligible for leave pay under the following qualifying events:
Reason 1: Is subject to a federal, state or local quarantine or isolation order. This does not include a “stay at home” order unless it has specific orders that would include the employee. For example, if the state ordered that no one over 65 can leave their home for work..
Reason 2: Has been advised by a health care provider to self-quarantine.
Reason 3: Is experiencing symptoms associated with COVID-19 and is seeking a medical diagnosis. See question 62 for more details.
Reason 4: Is caring for an individual subject to a quarantine or isolation order.
Reason 5: Is caring for a child whose school or place of care is closed or unavailable due to coronavirus-related reasons.
Reason 6: Is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services (HHS). The HHS has not specified any other substantially similar condition at this time.
What documentation can I require from the employee who request leave under one of the qualifying events?
VERY IMPORTANT: Employers may not request a doctor’s note or an official notice from a closed school or daycare.
Employers can substantiate eligibility for the sick leave or family leave credits by receiving a written request from the employee using something like the document available for download below:
For leave based on a quarantine order or self-quarantine advice,
the request should include the name of the governmental entity ordering
quarantine or the name of the health care professional advising
self-quarantine. If the person subject to quarantine or advised to
self-quarantine is not the employee, that person’s name and relation to the
employee should be included.
For a leave request based on a school closing or child care provider unavailability, the statement should include the name and age of the child (or children) to be cared for, the name of the school or place of care that has closed, and a representation that no other person will be providing care for the child during the leave. If a child who needs care is 15 or older, the employee must affirm that there are special circumstances (but need not explain them) — the IRS otherwise assumes children 15 and older can take care of themselves for the length of a workday.
OK, the employee qualifies, how much should I pay them?
It depends on what the qualifying event is.
For the first 2 weeks of leave, the employee would receive Emergency Sick Leave as follows:
If it is for reason 1, 2 or 3 (Self), then the employee should be paid for up 10 days at their regular rate of pay (up to $511 per day)
If it is for reason 4 or 5 (Care of others) then the employee should be paid for up to 10 days at two-thirds their regular rate (up to $200 per day)
See questions 6 & 8 for direction on how regular rate of pay is calculated or click here for more detailed guidance
See question 5 to determine hours per day for part-time employees
If the employee is out on leave for reason 5 (Child care) and it last longer than 2 weeks, then they are entitled to the extended family medical leave at two-thirds their regular of pay (up to $200 per day) for an additional 10 weeks.
Are there any tax credits available to help me cover the cost of providing leave?
Yes. You may reduce the amount of federal taxes paid to the IRS by the amount of leave paid. For example, if the federal deposit liability for the payroll is $10,000 for all employees paid and you paid out $4000 in Emergency childcare leave pay to employees during the pay period, you would only pay $6000 to the IRS.
What if the amount I pay out in sick pay is higher than the federal tax liability?
You may request an advance of the anticipated leave payments or request a credit when the sick pay amount exceeds the total tax liability from the IRS by completing IRS Form 7200.
I have less than 50 employees, am I exempt from providing leave?
Small employers are potentially exempt from only childcare leave(Reason 5) and must provide documentation that providing leave under reason 5 would cause the employer to cease functioning at a minimal capacity.
How will I report emergency sick pay or extended family medical leave to Payality?
We have added additional earnings codes in our system to report the leave based on the qualifying reason.
CVDREG for sick pay leave at the employees’ regular rate of pay for reasons described in 1,2, or 3.
CVDCARE for sick pay leave at two-thirds the employees’ regular rate of pay) for reasons described in 4 or 5 (or 6 when defined by HHS)
CVDFMLA for extended family medical leave at two-thirds the employee’ regular rate of pay
CVDHLTH to report the employer’s cost of maintaining health insurance during the employees 2 weeks (10 days) of Emergency Sick Leave.
CVDFMLAIns to report the employer’s cost of maintaining health insurance during the employees paid 10 weeks of Extended Family Leave
How will Payality help us receive the tax credit?
We will deduct leave paid from the total federal tax liability we collect from you and pay to the IRS each check date. If the amount of leave exceeds the total federal tax liability, we will prepare form 7200 for you to submit to the IRS to receive an accelerated tax credit refund.
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.
Additional COVID-19 Resources
Click Here for Tips on Managing Your Finances During the Coronavirus Outbreak
- 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
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.
Please note that this web page is being provided for informational purposes. The SBA and Treasury has not yet issued final guidance and it is subject to change. This web page should not be considered legal, accounting, investment or fiduciary advice. Clients should consult their attorney or other professional advisor.
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