Which Workers Count as Employees for the PPP?

ppp loan Jan 18, 2021

Applications for the Paycheck Protection Program (PPP) go live for most lenders this Tuesday. If you’re preparing to apply for the PPP, the first step is to determine your monthly payroll and employee count for the application (you will be eligible for 2.5x your monthly payroll in PPP funding). But which workers count toward payroll and employee count? Here’s what you need to know.

Do Part-Time Employees Count For Your PPP Application?

Part-time, W-2 employees do need to be included in your total employee count (only businesses with less than 500 employees are eligible for a first-draw loan, and only those with less than 300 are eligible for a second draw loan).

You can also include the wages paid to your part-time employees in your monthly payroll calculation. Your payroll includes all the costs related to your employees, like wages, taxes, insurance benefits, and even paid time off. You can include pay to your part-time employees as well as any benefits you offer them and wage taxes you pay.

You will also be able to use your PPP loan, once you receive it, to pay your part-time employees and still qualify for full forgiveness (if you follow the PPP spending guidelines, the loan functions as a grant and is entirely forgivable).

Do 1099 Workers Count for Your PPP Application?

Some businesses utilize independent contractors, which they pay with 1099s rather than W-2 forms, for their businesses. Unfortunately, independent contractors are not employees, and therefore you cannot include their pay in your monthly payroll for the PPP. They also do not count toward your employee headcount for the application.

Based on our current understanding of the SBA guidelines, you cannot utilize your PPP loan to pay independent contractors and still qualify for full forgiveness. If you use your PPP loan to pay independent contractors, you’ll have to deduct that from your forgiveness.

Do International Employees Count for Your PPP Application?

The PPP is designed to pay the cost of keeping workers in the U.S. employed. You cannot count the wages or other expenses paid to international employees toward your monthly payroll costs for the PPP. You also can't use your PPP to pay them and qualify for full forgiveness. However, our current understanding of SBA guidance is that you do need to count these employees toward your total employee count for determining your eligibility for the PPP.

For more info on the PPP, EIDL and other stimulus programs, try a free trial of Skip Plus.  You can track your funding, get help with applications and determine how much you might be eligible for.

📌 Disclaimer: This is for illustrational purposes only and not to be construed as tax, accounting, or legal advice. Work with your lender further if you have questions.

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