It goes without saying that these are unprecedented times. Here at McKonly & Asbury, we strive to support our business partners and the business community as a whole at all times, but especially now in this great time of need. In order to help and support the business community during this time, here are a few options to consider regarding business lending, employee short-term and long-term retention options, and insurance coverages to assist with near term cash flow impacts of COVID-19 (Coronavirus).
SBA Economic Injury Disaster Loan Program
The SBA will work directly with state governors to provide targeted, low-interest loans to small businesses and non-profits that have been severely impacted by the Coronavirus. The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
- Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available statewide to small businesses and private, non-profit organizations to help alleviate economic injury caused by the Coronavirus. This will apply to current and future disaster assistance declarations related to Coronavirus.
- SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
- Once a declaration is made, the information on the application process for Economic Injury Disaster Loan assistance will be made available to affected small businesses within the state.
- SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
- These loans may be used to pay fixed debts, payroll, accounts payable, and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.
- SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
- SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.
- For questions, please contact the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail firstname.lastname@example.org.
Pennsylvania’s Shared-Work Program
A Shared-Work plan allows an employer to temporarily reduce the work hours of a group of employees and divide the available hours equally rather than laying off any employees. Employees covered by a Shared-Work plan receive a percentage of their Unemployment Compensation (UC) Weekly Benefit Amount (WBA), while they work the reduced schedule, if they are otherwise eligible for UC.
Shared-Work allows you, the employer, to retain your workforce during a temporary slowdown and then quickly ramp up operations without the expense of recruiting, hiring, and training new employees. At the same time, Shared-Work helps to protect your employees from the financial hardship of a full layoff.
Potential Employer Benefits of Shared-Work:
- Maintains full staff for future business growth
- Reduces future hiring and retraining costs
- Maintains worker productivity
- Retains experienced employees
- Keeps worker morale high
The Scope of Each Shared-Work Plan:
A Shared-Work plan must apply to one “affected unit.” An affected unit is a department, shift, or other organizational unit assigned by the employer. An employer may have more than one Shared-Work plan. There must be at least two participating employees, determined without regard to corporate officers.
Every employee in the affected unit must have their work reduced by the same percentage. The only exceptions are for employees employed for less than three months or employees who would work 40 or more hours a week. These employees are not permitted to participate.
How Work Hours Are Reduced:
The percentage by which each worker’s hours are reduced is called the “reduction percentage.” The employer determines the reduction percentage based on business needs, but it must be at least 20 percent and cannot exceed 40 percent. The reduction percentage must be the same for all employees participating in a Shared-Work plan. For example, if a worker normally works 40 hours per week, and the reduction percentage is 20 percent, then the worker’s hours are reduced by 20 percent. The worker would work 80 percent of 40 hours, or 32 hours per week. If a worker in the same unit normally works 30 hours per week, then he or she would work 80 percent of 30 hours, or 24 hours per week.
How Unemployment Compensation Benefits Are Determined Under The Shared-Work Plan:
For each week included in the plan, a worker receives a percentage of his or her UC WBA equal to the reduction percentage. For example, if the worker’s WBA is $400 and the worker’s hours are reduced by 20 percent under the plan, the worker would receive 20 percent of $400 or $80 in Shared-Work benefits.
Employer Responsibilities and Procedures:
As an employer you may participate in the Shared-Work program if:
- You have filed all UC tax reports and paid all amounts due under PA UC Law.
- You have a positive reserve account balance (for contributory employers).
- You have paid wages for the last 12 consecutive quarters.
While enrolled in the Shared-Work program you agree that:
- You will not hire new employees in, or transfer employees to, the affected unit during the period of the Shared-Work plan.
- You will not lay off participating employees during the effective period of the Shared-Work plan or reduce participating employees’ hours of work by more than the reduction percentage during the effective period of the Shared-Work plan (except during holidays, designated vacation periods, equipment maintenance, or similar circumstances).
- You must continue to provide fringe benefits to participating employees not covered by a collective bargaining agreement.
- Implementation of the Shared-Work plan is in lieu of layoffs that would affect at least 10 percent of the employees in the affected unit and would result in an equivalent reduction in work hours.
- The reduction percentage will not change during the period of the Shared-Work plan unless a modified plan is approved by the department.
It should be noted that a Shared-Work plan may increase the amount of UC contributions due. If you are a contributory employer, the experience-rated portion of your UC contributions may increase based on the Shared-Work benefits that are paid. If you are a reimbursable employer, you will be responsible for the portion of UC benefits that are attributable to the employee’s service with your company.
Consult your Insurance Professional as to possible business insurance coverages available within your current program for Business Interruption
Most property insurance programs often include coverage for business interruption and lost profits. While these programs usually require a “direct physical loss of or damage to” the insured’s property, some coverages may cover losses for infectious diseases, flu outbreaks, and epidemics. It should be noted that most standard form business interruption programs will likely not afford coverage available for Coronavirus losses, because most standard form policies will require a direct physical loss or damage of property. However, it is worth reviewing your policy for what could be covered. The industry has developed endorsements that specifically provide coverage for business interruption due to viruses or diseases, even absent evidence of direct physical damage. If your business is in line for coverage renewals, you should consider these coverages if you do not have them already.
We’re here to help. If you have questions regarding any of these programs, please contact David Blain, CPA, CVA, Partner & Director of Entrepreneurial Services at McKonly & Asbury at email@example.com or by calling (717) 972-5722.
This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although McKonly & Asbury has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.