Payroll Protection Plan – Loan Forgiveness

It is fair to assume that most small businesses took out a PPP loan with the plan to have the loan forgiven. Many looked at the ambiguous requirements to get the loan forgiveness and concluded that it was too good of a deal to pass up and it was anticipated that forgiveness details would be cleared up by the time small businesses were ready to make the request of lenders. Late on May 15th, 2020 the Treasury/ Small Business Association released an eleven-page loan forgiveness application. With it, much of the uncertainty became complexity with a moving target.  

Key Loan Forgiveness Application Highlights:  

Payroll – Definition of “Payroll” has not changed.  Payroll is not just the wages employees have received, but includes items like FICA. However, payroll does exclude workers’ compensation coverage. If you need a breakdown on your payroll from Cardinal please email us at  

Measurement Period – When your loan was dispersed you were told the eight-week count down begins the day you receive it, but you might have another option. If you have a bi-weekly or more frequent pay period, you can shift to an alternative pay period to more closely match your payroll. (Please see upcoming article on a new 24-week alternative period.) 

FullTime Employees (FTE) Counts– The PPP was designed with the incentive in mind to have employers keep on as many employees as possible. With the alternative being, if you reduce staff, you get less money forgiven. If you have always had five full-time employees and your staff numbers did not change during the measurement period, this is pretty easy. But if you have different staffing levels or other changes, you will need to calculate your FTE count based on one of two manners, and use the same to calculate the FTEs in the measurement period. For the PPP, FTEs are employees who are working 40 hours or more per week. Those working less are a fraction based on the number of hours. Note that there is a safe harbor provision. If you had employees quit, or employees terminated, you can get a credit against your employee count. 

Reduction of Wages – Like the reduction in the number of employees, there is a complicated formula to reduce loan forgiveness if you reduce wages by 25% or more.  

Hazard or Bonus Pay – Many employers want to reward those coming back with some type of hazard pay. There is no prohibition in doing so. That said, one concern is if the hazard or bonus pay could attract additional scrutiny when getting forgiven by the lender. Also, there may be additional rules and clarifications that could possibly retroactively prohibit hazard and/or bonus pay. 

You can download a copy of the loan forgiveness application here: