Under the recently enacted $2 trillion Coronavirus stimulus bill (CARES ACT) small business owners have been afforded many provisions to help them stay in business and incentivize them to keep paying bills and their workers.
Specifically the Paycheck Protection Program (PPP) has provisions in it to provide forgivable loans for small businesses (generally less than 500 employees) that use those funds towards retaining their employees and making sure they get paid. However workers compensation at the small business’ payroll exceeding more than $100,000 per year will not be eligible for relief under the PPP meaning that small business owners won’t be able to claim the excess payroll related deduction and apply it towards loan forgiveness for those employees.
This could mean that employers choose to either cut pay for those higher paid employees or let go of the more highly compensated employees, which are generally management positions at small business.
Many who read this will complain that if someone is earning over $100,000 per year then they should be fine. But the reality is that in most large metro markets $100,000 is not that much and you will have several thousand workers at small business’ earning well above this amount. If the purpose of the stimulus was to retain employees the concern is that you could be encouraging companies to leave out, furlough or fire their most valued and senior employees in order to get the most amount of loan forgiveness and save their company under the new PPP program.
This article was updated on March 31