U.S. Paycheck Protection Program - When Can Companies Lay People Off?

July 21, 2020 5:03 AM

At what point do companies participating in the (United States) Paycheck Protection Program become able to fire/lay off current employees? Asking as an employee.
posted by anonymous to Work & Money (6 answers total)

They always could; they just have hire other ones. They have to maintain the same payroll (amount), not the same employees.
posted by chesty_a_arthur at 5:16 AM on July 21, 2020 [5 favorites]

but there are additional (unfunded) costs to hiring and training new staff. If i understand the situation (which i may not) i believe the asker is concerned about a situation where a business owner knows theyre not viable but is getting on just to take the PPP money, and plans to shutter things/lay everyone off as soon as theyre allowed to without risking having to pay back the money.
posted by Exceptional_Hubris at 6:29 AM on July 21, 2020

There's no set minimum term. This article explains it well. If the business spends the loan ask quickly as possible, it could be immediate (if they spend the loan quickly on one round of payroll and they applied for less than the maximum amount of 2.5x monthly payroll) to 24 weeks (if they applied for the second round of applications and spent the loan quite slowly).

That said, I suspect the vast majority of employers will ask for the maximum loan amount and then spend it on payroll at their usual spend rate, so 2.5 months after loan disbursement is a good guess.
posted by saeculorum at 6:32 AM on July 21, 2020 [1 favorite]

You can find loan details for businesses here. Loan approval is within 10 days of loan disbursement.
posted by saeculorum at 6:35 AM on July 21, 2020

It depends on whether the employer chooses the 8-week or 24-week covered period. The 8-week covered period extends from the date of the loan. The 24-week covered period extends from the loan date or to the end of the year, whichever comes first. For full forgiveness the employer must maintain the full-time-equivalents (FTE) over the chosen covered period. But there are a lot of exceptions to this rule.

The employer can lay off employees during the covered period but then the amount of forgiveness is reduced by a pro-rated amount depending on how many were laid off and for how long. There is a safe harbor for a 25% reduction in FTE wages and hours.

There is nothing preventing employers from laying off employees during the covered period, but it may result in a reduction in the amount of the loan that is forgiven. If not forgiven, the loan must be paid back within five years at an interest rate of 1%.

This is a simplified explanation but saeculorum's links provide more of the details.
posted by JackFlash at 11:42 AM on July 21, 2020 [1 favorite]

I'm administering our company's PPP loan documentation with our accountant's assistance. The start date of our loan was close to the date that the program started. We've been rounding up our employees' hours to 40 hours to take advantage of maximum PPP forgiveness. I asked my accountant when we needed to stop being concerned with the rounding up and he told me August 1.
posted by sarajane at 2:21 PM on July 21, 2020 [1 favorite]