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Unemployment and the PPP

Today, we’re going to be diving into the interactions between Unemployment and the Paycheck Protection Program or the CARES Act. We’re going to talk a little bit more about that in just a second. But before we go too deep, please subscribe to our podcast. You can find us on iTunes, Google podcast, Spotify, Stitcher, pretty much any podcatcher of your choice. You can also subscribe at which will give you access to subscriber-only content, lots of links on these pages, supporting documents, checklists and special discounts on things like our in-depth deep dive into the termination process, including 30 and 32 part lesson, state-specific information, all the forms you need. If you wind up going down the route of layoffs or terminations could be super helpful for you. For that, we have a 50% coupon code for subscribers to bring that price down a ton. 

Now let’s dive in. The CARES Act has had far-reaching implications for our clients and listeners. I, personally, have tried to stay out of advising people on the CARES ACT loans. My company People Processes in the HR world and the Paycheck Protection Program, which is part of the CARES Act, are the BANK’s jobs to administer, and they’ve had a heck of time presenting even marginally standardized processes or advice over these first two weeks of the PPP. 

But the dust is settled now, I’m not going to be going into the ins and outs of how the PPP to warrant loan works. If you don’t already know you’ve missed the boat. Funds ran out last week. So this is more about our decision making now for that 20 % or so of companies that have gotten a PPP loan. So our current question has been coming up. 

I’ve been getting emails about, for those of you who have applied for the PPP, and actually gotten funds or at least an SBA guarantee, and you’re waiting on deposit, CONGRATULATIONS! I mean, you’re in a small minority of businesses and I really do think it can be very helpful to you. 

However, it seems some of those people didn’t quite read the fine print on those loans. The PPP loans are forgivable, but ONLY if you :

>Spend 75% of the money in the eight weeks following the loan on the payroll. 

>And you have to keep 75% of your headcount that you applied with on your loan, which is really last year’s average headcount 2019. 

>And then you have to actually spend the other 25% on qualified expenses. 

So if you get a pile of money from them and you don’t spend it over the next eight weeks on payroll, rent, mortgage interest, those sorts of things. You’re going to have a problem. Let’s say you have a business like a restaurant. A month ago you laid off the vast majority of your staff. Now you receive the PAYCHECK PROTECTION PROGRAM that’s what it’s called money. But you have no staff to pay, no work to do. How do you get the loan forgiven? 

Well, the short answer is you don’t. I mean, I hate to say it, but the loan is forgivable only when you have payroll to support it. If you are a hair cutting salon and under a mandatory shelter in place order, having employees come in to cut hair is “not an essential service.” If you receive the funds this week, but your payroll is only 5% of what it was last year, well, you’re probably gonna have to pay this loan back rather than have it forgiven. 

Your alternative is to “hire” your people back to say, “All right, well, look, we laid off all of you. Come on back.” Rather than have them claim unemployment. You can pay them to work from home, too. The haircutting salon, the restaurant, the residential floor company that asked us about what they do like floor refinishing, they can’t go into people’s houses right now. They originally did some major cuts, they CAN put people back on the payroll. Consider having daily or weekly happy hours or strategic meetings (over the web!), “Brainstorm – Plan – Execute” meetings that can make sure you are ready to roll when things come back online. 

I know for a lot of small business owners, it’s hard to imagine paying your staff when there’s no work to be done, but that is what the PPP is for. It’s there so that companies who would otherwise not have the revenues to keep staff, WILL keep (or rehire them.) 

There’s a fly in the ointment though: 

There’s a problem that, well, let’s just call it the rule of unintended consequences. The increased subsidies to workers through the Federal Pandemic Unemployment Compensation (FPUC) was part of the CARES Act, it’s gonna make it harder to retain workers under the PPP: The FPUC provided an additional $600 per week across all sectors and income levels of the amount that these workers would be receiving from their state Unemployment Insurance programs. That means that for many lower-wage and even middle-wage workers, those roughly earning less than $44,000 a year in many states, they’ll make more on Unemployment than they would through their employment. And isn’t that a… Wow… Well, it’s what they did. 

So the result will be more money in the pockets of the lower wage and even middle-wage workers. However, it will blunt retention under the PPP. We’re going to know over the next few months the extent to this trade-off. 

But for those of you in the situation, that haircutting salon, your employees may be better off on it under unemployment rather than coming back to “work.” What about the situation? How are you going to fix it? Well, you have two options. I mean, on paper the option is you hire new people, but that’d be a heck of a thing, and probably not possible. If your old employees won’t come back to make less money to work rather than be unemployed, you’re not gonna find new people that you want to have. And again, you can’t get them to work. Or you don’t need the PPP. 

If you got funds already, you applied under this saying, “Hey, we’re gonna use this to protect paychecks.” You can’t hire your people back because their unemployment pays better than you would. Well, it’s a loan now. Set that money aside, consider it a great low-interest loan to blow out your marketing when you reopen or provide a nice easy ramp so that you can bring your people back on. So that when you reopen, you can rehire, you got plenty of money set aside. For companies in this situation. You have to understand the PPP is there to be an ALTERNATIVE to unemployment. If your people are unemployed and the unemployment is really good, well, you got a nice loan, NOT a forgivable grant. 

I know it’s hard and a lot of people kind of went into this thinking that this will be helpful. I reopen my restaurant, but it’s meant to be this temporary short term thing. And if you can’t spend it right now, well, it’s still a lot of help. You’re well-capitalized. Now, maybe you weren’t before. But now you have a great loan. And if you don’t want to use it, that’s okay. You can just give it back to the bank and boom, you paid off your loan. So it didn’t hurt you at all. You didn’t have to pay an application fee, you didn’t pay any points on it. So if you just decide this isn’t for you, that’s okay. But most of you, you want that money in the bank and the 1-4% interest rate that you’re going to pay on it is cheaper than you would get on anything else. So when it’s time to reopen, awesome, you’re in great shape to do so. 

Ladies and Gentlemen, my name is Rhamy Alejeal, I’m the CEO of People Processes. And we help companies with software, administrative services, and HR consulting all across the people processes world. That’s from onboarding to retirement and really recruiting to retirement. We can handle payroll benefits. We have been so overwhelmingly busy these last few weeks because of the CARES Act and the FCRA. But it’s been amazing to see how our clients have reacted and been able to keep people on some have had to do layoffs. Some have had to just heroic measures to keep these businesses up and running. And I’m so excited to see over the next few weeks or months as the country reopens the explosion of growth that’s going to come from our clients and other businesses like them across the United States. You can reach us at service at, go to and subscribe. I’d love to see you there. Join our community so that we can grow together, learn together, and have a great day and get your work done. Thanks For listening.

About the author, Rhamy

Rhamy grew up watching and working with his mother and grandmother in the senior insurance market. This familiarity with the struggles faced by people trying to navigate the incredibly complicated and heavily regulated healthcare market led him to start Poplar Financial while working on his degree at the University of Memphis. After completing his MBA and Bachelors in Finance and Economics, Rhamy guided Poplar Financial through the disruptive opportunity that is the Affordable Care Act. Since then Poplar Financial has received numerous awards from major insurance carriers and has completed its fourth year in a row of doubling in size. Now his team focuses on the processes around human resources and specializes in providing companies with between 20 and 1000 employees with the payroll, benefits, and HR needs.

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