The Coronavirus Aid, Relief, and Economic Security (CARES) Act is more than 800 pages long, and many of the proposals will require the cooperation of federal and state agencies before the practical details can fully take shape. That being said, a range of tax credits are being made available for immediate relief and paycheck protection loans are also available for small businesses with fewer than 500 employees. Thanks to the CARES Act’s encompassing nature, HR professionals are in a unique position to be able to help out both their employers and employees take full advantage of all that the CARE’s Act has to offer.
Netchex has been following the latest COVID-19 developments closely and has discussed the major components of the CARES Act in a previous blog. Netchex recently introduced the COVID-19 Response Portal, an easy way for employers to institute, track, and remain compliant with the new COVID-19 laws (and flow seamlessly into payroll) all within our system.
To further help you understand and adapt to new legislation, here are the top 5 things HR professionals need to know about the CARES Act to help their employers and employees:
Employee Retention Tax Credits and Payroll Tax Holidays
As previously discussed, tax credits are being used to help businesses retain employees and provide FFCRA leave. A percentage of funds that would normally be deposited with payroll taxes can instead be used to pay leave for employees who meet certain criteria. For all qualifying leave payments, the IRS has pledged to provide reimbursement. There’s also a temporary payroll tax holiday to help employers overcome financial shortfalls.
Paycheck Protection Loans
For those businesses that are small enough to qualify for the Small Business Act, mainly those with fewer than 500 employees, the CARES Act makes $349 billion available for loans. For an 8 week period, the loans will be forgiven insofar as they are spent covering rent, mortgage interest, payroll costs, and specific utility payments.
Human Resources professionals should also understand other components that may impact employees. The individual rebates, for example, may help your employees through the interim until your workflow returns to normal.
In a program that might end up costing the federal government as much as $301 billion dollars, stimulus checks (mostly direct deposits) are being sent to individual taxpayers and households. While this element of the CARES Act is less immediately relevant to business operations, it should have a significant impact on employees who are having to scrape by with fewer hours and reduced pay. It’s not always possible to find remote alternatives for on-site jobs, and so many businesses have resorted to layoffs.
The stimulus checks are relatively simple for residents earning less than $75,000 and married couples earning less than $150,000. Individuals will receive a $1,200 rebate and couples will receive $2,400. Parents earn an additional $500 per child under 17, so a family with three kids could receive $3,900 total. Individuals with higher than the maximum income will receive smaller checks, such that a single person making $98,000 would only receive $50.
Unemployment Insurance and Assistance
Tax credits and other measures are intended to reduce the number of layoffs, but it’s important to know that the CARES Act also provides support for the recently unemployed and those with reduced hours. For those who have been displaced as a result of COVID-19, the Act provides an additional $250 billion through the unemployment insurance system. With the additional funding, maximum payments are being raised by $600 per week with “Federal Pandemic Unemployment Compensation,” and the unemployment benefits continue for an additional 13 weeks (until the end of 2020 at the latest). Independent contractors and those who are self-employed may also be eligible for Pandemic Unemployment Assistance if their employment status has been affected by this crisis.
Those who are able to telecommute are ineligible for the new unemployment insurance funds, although it’s uncertain what authority will be able to define which jobs are compatible with remote work. If an individual is already receiving paid leave through FFCRA, then they’re ineligible for these unemployment funds. Since the rate isn’t tied to previous earnings, there’s concern that $600 per week (which averages out to $15 for a theoretical 40 hours) may be more than some employees could earn by continuing to work, especially if a business’s cost-saving measures require reduced hours. Future press releases and recommendations are expected to clarify the limitations and details of the unemployment insurance component of the CARES Act. Since unemployment insurance is managed jointly by state and federal agencies, you will need to see how your state implements these supplementary programs.
If you have needed to cut back hours for employees, then you will particularly want to watch how your state implements the “short time compensation” aspect of the CARES Act. Even if your state previously hasn’t offered short time compensation for workers with reduced hours, this legislation includes grants and funds to cover start-up costs for developing the relevant compensation programs.
Direct Lending for Mid-size Businesses
A lot of attention has been paid to programs for smaller businesses, but the CARES Act also provides direct-lending opportunities to shore up key industries. It’s still uncertain exactly which businesses and municipalities will have access to the $500 billion, but participants will have limitations on how they use the funds, barred from directly using the loans for stock buybacks or executive bonuses. While portions are set aside for airlines and businesses related to national security interests, the vast majority ($454 billion) is intended to provide liquidity to unspecified businesses, municipalities, and states.
For mid-size businesses (from 500 to 10,000 employees), loans will be interest-free for the first six months, and no payments will be required in that period. The loans come with certain conditions intended to minimize unemployment during the crisis. Recipients must maintain 90% of their current workforce (with full pay and benefits) until the end of September, and there must be an attempt to rehire employees if more than 10% have been fired since the beginning of February. Until the loan is repaid, participating businesses also agree to remain neutral in union organizing efforts and cannot outsource jobs. Some of the conditions that apply only to mid-size loans might make the program significantly less appealing to businesses, and the final scope and effectiveness of the “Main Street Lending Program” is still uncertain.