The following are simply a few made up examples of how the forgiveness program works, which is how you determine your ultimate pay back responsibility. It is obvious that the many variables in the program can change how this loan works.
Sample Calculation #1
You normally have 20 employees and have since February 15, 2019. You lay off 50% of them on March 30, 2020. Additionally, you have a retained an employee whose normal wages equal $70,000 a year but you have reduced their wages to $56,000. You take out your loan on April 15, 2020 but by June 10, 2020 (eight weeks) you have rehired all your staff and brought the retained employee’s salary back to $70,000.
The monthly average of applicable expenses for the period February 15, 2019 thru June 30, 2019 (or, if applicable January 1, 2020 thru February 29, 2020) is $50,000. You may borrow up to $125,00 and elect to borrow than entire amount.
During the period from April 15, 2020 to June 10, 2020, you document you spent $125,000 on allowed expenses which is your total loan forgiveness. The total loan forgiveness will be further reduced as follows:
- FTE reduction: 12 (average #FTE per month during the eight week loan period) / 20 (normal #FTE per month 2/15/2019 thru 6/30/2019) = FTE reduction of 40% or $50,000
- Salary reduction: No salary reduction since you did not reduce the employee’s salary more than 25%.
- TOTAL REDUCTION IN FORGIVENESS AMOUNT: $50,000. You spent the entire loan amount so you will need to pay back $50,000
- BUT – because you rehired all your employees and had no reduction in salary by June 10, 2020, you retain the entire $125,000 forgiveness amount and pay back nothing.
Sample Calculation #2
You normally have 10 employees and have since February 15, 2019. You lay off 50% of them on February 15, 2020. Additionally, you have retained an employee whose normal wages equal $60,000 a year but you have reduced their wages to $30,000. As of June 30, 2020, you have not rehired any staff nor adjusted the wages of the retained employee.
The monthly average of applicable expenses for the period February 15, 2019 thru June 30, 2019 (or, if applicable January 1, 2020 thru February 29, 2020) is $50,000. You may borrow 2.5X that amount or $125,000 but elect to borrow only $100,000.
You take out your loan on May 5, 2020. During the period from February 15, 2020 to June 30, 2020, May 5, 2020 to June 30, 2020 you document you spent $50,000 on allowed expenses which is your total loan forgiveness. The total loan forgiveness will be further reduced as follows:
- FTE reduction: 5 (average #FTE per month during covered period of 4.5 months) / 10 (normal #FTE per month May 5, 2020 thru June 30, 2020) = FTE reduction of 50% or $25,000
- Salary reduction: Employee would normally make $5,000 per month or $15,000 a quarter. You reduced their salary by $7,500 = Salary reduction of $7,500
- TOTAL REDUCTION IN FORGIVENESS AMOUNT: $32,500. You will need to pay back $50,000 (money not spent) plus $32,500 (reduction in forgiveness amount) or a total of $82,500.
Sample Calculation #3
You normally have 10 employees and have since February 15, 2019. You lay off eight of them on April 15, 2020. You keep your office manager at full time salary and reduce the other remaining employees’ normal wages of $40,000 to $25,000. You rehire five of them on May 15, 2020 and you bring the one employee’s reduced salary back to normal.
The monthly average of applicable expenses for the period February 15, 2019 thru June 30, 2019 (or, if applicable January 1, 2020 thru February 29, 2020) is $50,000. You may borrow up to 2.5X that amount and elect to borrow the entire amount – $125,000.
You take out your loan on June 1, 2020. During the period from June 1, 2020 thru July 27, 2020, you document you spent $100,000 on allowed expenses which is your total loan forgiveness. The total loan forgiveness will be further reduced as follows:
- FTE reduction: a little complicated (your is 7 for the first four weeks of the loan period and 9 for the second four weeks) so 8 (average #FTE per month during eight weeks of loan period) / 10 (normal #FTE per month 2/15/2019 thru 6/30/2019) = FTE reduction of 20% or $20,000.
- Salary reduction – No salary reduction since you brought the employee’s reduced salary back to normal by June 30, 2020.
- TOTAL REDUCTION IN FORGIVENESS AMOUNT: $25,000 (amount you did not spend) $20,000 (FTE reduction) = $50,000. You will need to pay back $45,000.
