Loan forgiveness may be reduced based on the difference between full time-equivalent (FTE) employees during the covered period and the number of FTEs during a comparison period. If the number of FTEs decreased, your eligible forgiveness amount may be reduced. However, you may be exempt from certain loan forgiveness reductions if you restore FTEs no later than December 31st, 2020.
What are FTEs?
FTE stands for Full-Time Equivalent employee. Both part-time and full-time employees are included. Think of this as measuring how many sets of 40 hours are worked each week. Each set can be worked by one full-time employee or a combination of part-time employees.
Each employee who works a standard full-time work week (or more) is counted as 1 FTE. Each part-time employee is counted as a partial FTE based on the number of hours they work in a week.
Do I need to validate the number of FTEs displayed by the Estimator?
Yes. Because hours may not be available for every employee with a pay type of salary or other, the Estimator makes assumptions to determine the average hours worked.
Carefully review the PPP Forgiveness Data report, paying special attention to the hours assumed for employees designated as salary or other. Modify them as necessary.
How are FTEs calculated in the PPP Loan Forgiveness Estimator?
The Estimator assigns each employee an FTE count. It then sums the FTE counts for all employees during the covered and comparison periods.
- For Salary pay type – Full Time or no status: The Estimator assumes the employee averages 40 or more hours per week and assigns 1.0 FTE.
- For Salary pay type – Part Time: The Estimator assumes the employee averages less than 40 hours per week and assigns 0.5 FTE.
- For Hourly pay type: Hourly employees who average 40 or more hours per week are assigned 1.0 FTE. Hourly workers who average less than 40 hours per week are assigned 0.5 FTE.
An example:
- Gertrude is full-time salaried. She counts as 1.0 FTE.
- Jamal is hourly. He works an average of 45 hours per week. Jamal counts as 1.0 FTE.
- Pat is hourly. They work an average of 30 hours per week. Pat counts as 0.5 FTE.
If these three are the only employees, the company has 2.5 FTEs.
To update the Estimator, override the FTE values with your new FTE count. Be sure to do this for both the covered and the comparison periods. You must be consistent and use the same method for calculating FTEs throughout your forgiveness application.
Are there any exceptions?
These are the scenarios where you can include an FTE as if they were fully employed during the covered period, and the position remained unfilled.
If the employee:
- Rejected a good-faith, written offer of rehire for the same hours and wages (and you informed your state unemployment insurance office within 30 days).
- Voluntarily asked for and was granted reduced hours.
- Voluntarily resigned.
- Was fired for cause.
Or if you have a documented inability to:
- Rehire individuals who were employed on February 15, 2020; and an inability to hire similarly qualified employees.
- Return to the same level of business activity as you were operating at before February 15, 2020, due to compliance with COVID-19 requirements.
If any of these situations impacted FTE count during the covered period, add this employee's 0.5 or 1.0 count to the number in Estimator and enter it there.
What is the impact on estimated loan forgiveness?
If you have fewer FTEs during the covered period (as compared to the comparison period), the amount of the loan eligible for forgiveness will be reduced by the same percentage.
An example:
- Joe's Pizzeria had 10 FTEs during the comparison period.
- During the covered period, they had 7 FTEs working. The Estimator displays 7 FTEs for the covered period. However, one FTE left voluntarily. Joe's Pizzeria determines that it can use the FTE reduction exception. They manually update the Estimator to a total of 8 FTEs.
- To determine how much loan forgiveness will be reduced, the Estimator looks at the percentage of FTEs still working. 8 ÷ 10 = 80% of their FTEs are still working. The amount of their loan that can be forgiven will be multiplied by .80.
You'll see Percentage of FTEs still working in the Estimator under Track the progress, Amount 3.
What about the December 31st exemption?
If your FTEs decreased between February 15th and April 26th, you may be eligible for the FTE Reduction Safe Harbor if you fully restore FTEs to February 15th, 2020 levels by December 31st, 2020. More details about how this exemption is applied are expected soon.