The world of business today is a vastly different landscape than it was a year and a half ago. The COVID-19 pandemic has brought with it unprecedented shifts in the modern marketplace with paying customers encouraged to stay out of stores and businesses of all sizes being forced to adapt on the fly. Because the pandemic took such a toll on the economy, the U.S. Department of the Treasury introduced a landmark program designed at aiding small businesses struggling with the pandemic: the Payroll Protection Program.
But just what is the Payroll Protection Program? Let’s take a look.
The Purpose of the Payroll Protection Program
The Payroll Protection Program is a program established by the Department of the Treasury to provide incentives for businesses to keep their employees staffed. The program dispersed funds to qualified applicants to cover costs like employee salaries, rent for facilities, utilities and more. The loan system is designed to reward businesses for retaining employees even during an uncertain time, financially speaking.
How the Program Incentivizes Employee Retention
Perhaps the greatest boon of the Payroll Protection Program is that it provides small businesses with funds to pay their employees for their work. Both the program’s first and second loans clearly define that a minimum 60% of the total loan given must be used to cover the company’s payroll costs in order to qualify for loan forgiveness. The program’s guidelines also stipulate that in order to qualify for the loan, certain employee numbers and compensation levels must be maintained.
Does My Business Qualify?
Many struggling businesses have sought assistance through the Payroll Protection Program to date, and the U.S. Small Business Administration clearly defines a set of criteria businesses must meet to be considered eligible: businesses with up to 500 employees (or greater if it meets the SBA’s industry size standard), even including operations like independent contractors and self-employed persons. Businesses classified as “accommodations and food services” with multiple locations can also be eligible if their total employed number is below 500.
Many businesses have already taken advantage of the benefits of the program, with a report from the SBA showing that since the program’s inception, 11 million businesses have been dapproved to the tune of just under $800,000,000.
Benefits for Both Parties
The Payroll Protection Program seeks to benefit not only employers but the welfare of their employees. The system provides very clear guidelines on the intended use of the given loan, stipulating that employees and their given compensation must be retained as a major facet of the loan. Employees can rest assured that their livelihoods will not be endangered by the uncertain state of the business world, while employers can use the loan to make up for money lost from the initial closures caused by the pandemic.
Through providing these incentives, the Payroll Protection Program looks to provide a safety net for businesses impacted by the onset of the COVID-19 pandemic. The program also gives an opportunity for businesses to be able to afford their employees’ salaries while also providing funds that can be used to keep the business from closing its doors.
Bottom Line: The Payroll Protection Program Has Helped Businesses During the Pandemic
This past year has been tumultuous for both business owners and employees. Business owners worried that they would not be able to operate at full capacity, while employees fretted that they could soon be out of work. The Payroll Protection Program helped many businesses stay grounded so their employees could continue to work and earn paychecks.