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There’s a skill in calculating the area of a floor vs. actual amount of floor covering you need—and it’s never as simple as the customer thinks.
Counting up your employees for a PPP application is the same!
Not all employees count in full. So how do you know the right number of employees to include in your PPP application? For many flooring dealers, this is one of the most important aspects of the COVID-19 stimulus package—so it’s important to get it right. Here’s how to do it.
Table of Contents
- 1 Counting employees for a PPP loan isn’t as simple as it sounds
- 2 Use the FTE equation instead of a head count
- 3 How to use the FTE equation
- 4 Here’s an example of how you would calculate the FTE for an hourly employee
- 5 You want to get the lowest possible FTE number for maximum forgiveness
- 6 Here’s an example of how you would calculate your total FTE with both salaried and hourly employees
- 7 And don’t forget to count yourself
- 8 Once again, choose the lowest number possible
Counting employees for a PPP loan isn’t as simple as it sounds
When you fill out your PPP application, you’ll be asked to count your employees for a reason—it defines the parameters of your forgiveness formula! But it’s not as simple as adding “one” for each person. You have hourly employees and salaried employees, and each one counts differently. And that can make all the difference when it comes to PPP loan forgiveness.
Use the FTE equation instead of a head count
Because this calculation is not described particularly well on the PPP application, we refer to the fourth certification in the PPP applicant form where they use the term “full-time equivalent employees” or FTE. This is a fairly common term in the tax code—and luckily, it’s well-defined. We recommend using the FTE equation to calculate your number of employees.
How to use the FTE equation
To compute your FTE equation for your PPP application, you can choose between two different time periods:
February 15, 2019 to June 30, 2019.
– OR –
January 1, 2020 to February 29, 2020.
Remember: you must choose one of these time periods. Not both!
Within one of those time periods, count up all your hourly employees’ hours—the exact number of hours each employee was paid for, for each week. This includes hours worked, vacation, sick days, etc. However, you should never count more than 40 hours per week for any one employee.
Take your employee’s total hours and divide by the number of weeks (to find the average hours worked per week).
Then, divide this number by 40 (the hours in a full-time week). The resulting number will never be greater than 1, which makes sense because one person can’t equal more than 1 full-time employee, right?
Here’s an example of how you would calculate the FTE for an hourly employee
- Week 1: paid 20 hours (20 hours counted)
- Week 2: paid 45 hours (40 hours counted due to 40 hours/week max)
- Week 3: paid 40 hours (40 hours counted)
- Week 4: paid 30 hours (30 hours counted)
- Week 5: paid 35 hours (35 hours counted)
- Week 6: paid 10 hours (10 hours counted)
- Week 7: paid 50 hours (40 hours counted due to 40 hours/week max)
- Week 8: paid 25 hours (25 hours counted)
Total FTE hours counted: 240
Divided by 8 weeks: 30 average hours per week
Divided by 40 hours (1 full-time work week): 0.75
FTE Total: This employee is considered 0.75 FTE (30 hours is 0.75 of one 40-hour full-time week)
And of course, one salaried employee equals 1 FTE
This calculation is for hourly employees—salaried employees always count as 1 FTE—because they are full-time employees.
You want to get the lowest possible FTE number for maximum forgiveness
The higher your FTE number, the less forgiveness you’re going to be eligible for under the PPP. That means you should calculate both of the times periods outlined above and choose the smaller of the two numbers.
Here’s an example of how you would calculate your total FTE with both salaried and hourly employees
- Employee 1 is salaried, so they are considered 1 FTE
- Employee 2 averaged 30 hours per week. 30 hours/40 hours = 0.75 FTE
- Employee 3 averaged 20 hours per week. 20 hours/40 hours = 0.50 FTE
- Employee 4 averaged 10 hours per week. 10 hours/40 hours = 0.25 FTE
1 FTE + 0.75 FTE + 0.50 FTE + 0.25 FTE = 2.50 FTE
In this example, the total number of employees to report on your PPP application form is 2.50. Isn’t that so much better than just doing a headcount? Now you’re eligible for more PPP loan forgiveness.
And don’t forget to count yourself
Add one more FTE for each owner claiming wages without a W-2, either as a sole proprietor or partner of your flooring business. Not knowing who to include on a PPP application was one of the biggest follow-up questions to our COVID-19 stimulus Q&A, so we hope this helps!
Once again, choose the lowest number possible
Again, go through the calculation for both time periods and choose the LOWER of the two. You want to use the LOWEST number possible to set yourself up for maximum forgiveness!
If you have any questions whatsoever, please don’t hesitate to reach out. FloorForce is committed to helping you and your flooring business through this difficult time, so if there’s anything we can do, please get in touch!
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