The changes Congress made to the Paycheck Protection Program could make it easier for Michigan companies carrying the loans to ease back into full operations using a partial unemployment program after a nearly three-month-long coronavirus pandemic interruption of business.
But it's tricky, experts say, and may vary on a case-by-case basis among businesses that rushed to secure 1 percent PPP loans during the height of the coronavirus outbreak in Michigan when most economic activity ground to a halt.
The U.S. Senate last week sent President Donald Trump changes to the PPP loan program that extend the spending period from eight weeks in May and June to a 24-week period that extends into early October.
Congress also is loosening the percentage of the loans that has to be spent on payroll from 75 percent to 60 percent in order to get a portion of the loan forgiven. The remaining 40 percent can be spent on rent and approved non-payroll expenses.
Both changes create an opening for businesses to put workers on partial unemployment through the state's work-share program while paying wages from the loan proceeds, said Jamie Lopiccolo, a certified public accountant and owner of Capocore Professional Advisors in Lake Orion.
"It makes sense now that work-share, in the right circumstances, could actually become a benefit as an option as long as (workers) don't see a decrease in their hourly rate," Lopiccolo said.
State labor officials have been trying to get employers to consider the work-share program as a means to gradually ramping up production in factories or hours of operation in restaurant businesses that reopen statewide Monday.
Over the past month, as certain sectors of Michigan's economy have been gradually coming back online, the number of employers bringing back laid-off employees through the work-share partial unemployment program has doubled to nearly 1,100. The number of employees covered by the work-share program has increased six-fold to nearly 58,000 since the first week in May, according to the Michigan Department of Labor and Economic Opportunity.
The work-share program allows employers to reduce an employee's hours — and their payroll cost — between 10 percent and 60 percent and those workers then get a prorated portion of Michigan's $362 weekly unemployment benefit.
Employees enrolled in the work-share program also qualify for the $600 weekly federal pandemic benefit through the end of July, an enticing benefit that's allowed employees to ease back into full productivity while earning more in salary and unemployment payments than their normal wages. If a worker's hours are reduced by 10 percent, they would get $36 in regular weekly unemployment plus the $600 one-time federal benefit that ends July 25, according to the state labor department.
The added federal benefit has had some businesses that got a PPP loan trying to figure out how to double dip into both government programs.
There are ways to do both, but "it is complicated," said Michael Tierney, CEO of the Community Bankers of Michigan.
"The main thing is they have to do what's right for their business," Tierney said.
The new provision lowering the payroll threshold to 60 percent of the loan and extending the spending period to 24 weeks gives employers more flexibility to qualify for loan forgiveness.
"PPP loan forgiveness is important ... and all of us bankers want you to get your loan forgiven," said Tierney, a veteran Southeast Michigan banker. "We don't want a 1 percent loan out there for two more years or maybe longer."
The bill on the president's desk gives businesses five years to pay back their bank for the PPP loan, instead of the original two-year term.
Loan forgiveness hinges on spending at least 60 percent of the loan on payroll during the 24-week period.
Reducing hours for an employee returning from layoff to qualify for the work-share program also reduces the number of full-time equivalent jobs based on a 40-hour work week, Lopiccolo said.
The U.S. Small Business Administration's PPP loan program requires employers maintain the same number of FTEs as they had during two time periods that businesses can elect to use, Feb. 15, 2019 to June 30, 2019 or Jan. 1 to Feb. 29 of this year, Lopiccolo said.
Lopiccolo contends mixing employees on work-share is "kind of defeating the purpose of the (PPP) loan," which was designed to keep workers out of the unemployment line.
"Your PPP forgiveness is ultimately based upon how much did you pay of that loan (in wages)," Lopiccolo said. "So if you've got the work-share and the PPP at the same time, you're going to have a lower wage base or wage calculation because you're not going to have as many dollars in wages."
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