Paycheck Protection Program

Important information, documents, and resources for PPP Loans of The Coronavirus Aid, Relief, and Economic Security (CARES) Act

Paycheck Protection Program

Paycheck Protection Program - Loan Forgiveness 


This information is constantly changing and is up to date as of May 26, 2020. Please check back regulalry for updated information 

Introduction: on March 27, 2020 legislators passed the CARES Act. One of the significant components of the CARES Act was the PPP (Payroll Protection Program). The intent of the PPP loans is to provide a short-term lending vehicle for employers to help keep their employees in place. Businesses will qualify for loan forgiveness for eligible expenses ('payroll' and 'other costs') 'incurred or paid' within 8 weeks, (with an emphasis on Payroll). 'Incurred or paid' means either incurred in the 8-week-period (even if not paid yet), or paid within the 8-week-period (even for expenses incurred prior to payment). Note: payments incurred will only be counted if payments are made by the next pay cycle. As per the current guidance, it seems that payments 'paid' within the 8-week period, for expenses incurred prior to that, will be eligible for forgiveness. However, what is not clear is, how far back those expenses may have incurred. Please consult with your advisor for guidance on this.


Forgiveness amounts will decrease for each of the following: 

  1. more than 25% of the forgivable funds were used for other costs

  2. your employee (FTE [full-time equivalent]) headcount decreases

  3. if any employee wage levels decrease by more than 25%.

To request forgiveness, you will submit a PPP Loan Forgiveness Application to your lender. The lender will have up to 60 days to determine the amount eligible for forgiveness. 


Ready for the nitty-gritty? Here we go: 

8 weeks: generally, the 8-week-period (56 days) starts on the day the loan is received in your bank account. Companies whose payroll frequency is bi-weekly or more frequent may use an alternative 8-week-period (for payroll-related calculations) starting on the first day of the pay period following receipt of the loan. 

Eligible expenses: Payroll and Other costs


Payroll costs

  • Included:

    • Gross payroll capped at 100k annual ($15,385 for 8-week-period) per employee

    • Employer state unemployment insurance and local taxes (excluding owners)

    • Employer-sponsored health plans (excluding owners)

    • Employer-sponsored retirement plans (excluding owners)

  • Not included:

    • Owners pay cannot exceed 8 weeks' worth in 2019 (and in any case not exceed the $15,385 cap)

    • Payments to employees whose primary residence is outside the US

    • Payments to 1099 (independent contractors)

    • Federal employer taxes (Employer Social Security, Medicare and Federal Unemployment)

    • Family and sick leave for which a tax credit was received under the COVID-19 FFCRA


Other costs: includes mortgage interest, rent, and utilities (gas, electric, water, transportation, telephone and internet). Note: contracts on the above must have originated before February 15, 2020. 

Forgiveness decrease explanations

  1. Other costs in excess of 25%: If more than 25% of the 8-week expenses are for 'other costs', (in other words, if less than 75% of the funds eligible for forgiveness were spent on Payroll) your forgiveness amount will be decreased by the same percentage.

  2. headcount decrease: if your 'FTE (full-time equivalent) headcount' during the 8-week period is less than what it was in your 'lookback period', your forgiveness amount will decrease by the same percentage.

    1. ​'Lookback period': you can choose to use one of the following lookback periods: 2/15/19 - 6/30/19 or 1/1/20 - 2/29/20. Seasonal companies have an additional lookback period option of any 12 consecutive weeks between 05/01/19 - 9/15/19. Tip: choose the period that gives you the lowest figure.

    2. 'FTE headcount': to determine your FTE headcount (for lookback period and for 8-week-period), use this 4-step process:

      1. Calculate the average weekly hours per employee

      2. Employees that worked 40 hours or more per week on average (in period) = 1 FTE

      3. Employees who worked less than 40 hours on average, divide the average hours by 40 to determine employees' FTE (for example, 38 hours = 0.95 FTE)

      4. Sum your FTE and round to the nearest 10th

Alternatively, you can use a more simplified method for FTE determination as follows: any employee who worked 40 or more hours (on average) = 1 FTE and everyone else = 0.5 FTE. (Note: you must use the same FTE determination method for all FTE calculations.) 

Note: Employees who have terminated on their own, or who have declined your job reinstatement offer (in writing), may still be included in your headcount. However, if they were replaced by a new employee, you cannot count them both. 


  3. Wage levels decreases: for any employee that earned less than a 100k 'annualized rate' in any pay period in 2019, if you decrease that employee's wages during the 8-week-period by more than 25% of their quarter 1, 2020 wages, your forgiveness amount will be decreased by the total dollar amount decreased in excess of the 25% wage cut.

Note: your forgiveness amount will not be affected for hours cut if employees' salary or hourly wage did not decrease (however, reduction in hours will affect your FTE count). It will also not be affected by salary or wage cuts to employees who earned more than 100k in 'annualized rate' in any pay period in 2019. 

Refer to the 'Wage level decrease calculation' below**, for instructions on how to figure out wage decreases. 

Safe harbor for forgiveness decreases #2 (headcount ) and #3 (wage levels): borrowers that reduced their headcount or wage levels during the period between 2/15/2020 - 4/26/2020 have until 6/30/2020 to reinstate their FTE headcount and/or wage levels to what they were on 2/15/2020. If they do so, their forgiveness amount will not be affected by the above-mentioned 'headcount' and 'wage level' decrease assessments. 

Forgiveness determination tools: in addition, to keep you informed on laws and guidance; we want to assist you to maximize your loan forgiveness. We are designing our PPP reports to help you determine the necessary payroll changes as you move through the 8-week period. The following reports are either available or in production: 

      PPP - Payroll Expense Report (which calculates the qualified payroll expense for a given payroll). This report is already included in your payroll reports) 

      PPP - FTE Headcount Test Report (which will assist in counting your full-time equivalent for a given payroll, in comparison to the lookback period) 

      PPP - Wage Level Test Report (which will assist in determining wage level decreases) 

Please note, further guidance on the various PPP loan forgiveness rules are expected. The above reflects our understanding of the guidance currently available. New guidance may cause changes to the rules and advice herein. None of this information should be construed as legal guidance. Any information provided herein, as well as information provided in our PPP forgiveness tools or reports, should not be relied on for forgiveness preparation and final forgiveness determination. Please consult your lender, CPA or financial advisor for your specific situation. 


** 'Wage level decrease calculation' 

Determine the decrease for each employee as follows: 

Salaried employee: 

  1. determine their '8-week (annualized) salary' (i.e. 8-week wages, divide by 8 and multiply by 52)

  2. determine their 'quarter 1 (annualized) salary' (i.e. quarter 1 wages, multiply by 4)

  3. divide 8-week amount by quarter 1 amount - to determine the percentage of decrease. If your result is less than 0.75 (i.e. decrease of more than 25%) then,

  4. calculate the dollar amount of decrease in excess of 25% as follows:

    1. determine the 75% of 'quarter 1 (annualized) salary' amount (multiply quarter 1 amount by 0.75)

    2. take that amount and subtract the '8-week (annualized) salary' amount

    3. multiply the result of step 2. by 8 and divide by 52 (to break down the 'annualized' salary decrease dollar amount to the 8-week-period)

Hourly employee: 

  1. Determine average 'hourly rate for quarter 1' (add up employees' total wages from quarter 1, and divide that by the number of hours worked in quarter 1)

  2. Determine average 'hourly rate in 8-week' period (add up 8-week wages and divide by hours worked)

  3. Divide 8-week amount by quarter 1 amount. If your result is less than 0.75 (i.e. decrease of more than 25%) then;

  4. Calculate the dollar amount of decrease in excess of 25% as follows:

    1. determine the 75% of 'hourly rate for quarter 1' amount (multiply quarter 1 amount by 0.75)

    2. take the result of step a. and subtract the 'hourly rate in 8-week' amount

    3. determine average weekly hours worked in quarter 1 (total hours worked in quarter 1, divided by weeks worked)

    4. multiply the result of step 3. by the result of step 2. (i.e. the decrease in hourly rate)

    5. multiply by 8 (to get the 8-week period decrease)


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