How does FTE reduction exemptions work for PPP loan forgiveness?

If a business’s full-time equivalent (FTE) employee count was reduced during their covered period, the reduction might affect the amount of forgiveness the business qualifies for when applying for PPP Loan Forgiveness. However, there are several exemptions from the FTE reduction. 

FTE Reduction Exemptions

A business does not need to consider any FTE reductions in the following circumstances:

• If its PPP loan is for $50,000 or less (unless the business and its affiliates got more than $2M in PPP loans).
• If the business reduced its FTE employee count between Feb 15, 2020, and April 26, 2020, and restored FTE levels to the same level as the Feb 15, 2020 pay period by December 31, 2020 (or, for loans made after December 27, 2020, the end of the business’s covered period).
• All of the following are met:
  • The business made a good faith, written offer to restore the employee’s job and/or hours,
  • The offer was for the same salary/wages and the same number of hours as the last pay period before the reduction, and
  • The business maintains records documenting the offer and rejection.
• A business can document in good faith that:¹
• • The business could not rehire employees who were employed before Feb 15, 2020, and
  • The business was unable to rehire similarly qualified people for unfilled positions on or before Dec 31, 2020 (or by the end of the covered period if your loan was disbursed after Dec 27, 2020).
    
• A business is able to document in good faith that:
• • It was unable to operate at the same level of business activity as before Feb 15, 2020, due to requirements and guidance issued between Mar 1, 2020, to Dec 31, 2020, by the Secretary of Health and Human Services, CDC, or OSHA related to standards of sanitation, social distancing, or other worker or customer safety requirements related to COVID-19.
    • For loans disbursed after Dec 27, 2020, this exemption extends requirements and guidance issued between March 1, 2020, and the end of the business’s covered period.
      
• The business fired an employee for cause, or an employee voluntarily resigned or requested and received a reduction in hours. The business may count the employee(s) at the same FTE level as before the reduction for these employees.²

If your business does not qualify for any of the mentioned exemptions, please review our How do I determine my FTE and wage reduction for PPP loan forgiveness? support article to determine how to calculate the forgiveness reduction.

1 If this exemption applies (i.e., you were unable to rehire employees or find similarly qualified employees):
- You must inform your state unemployment insurance office of any employee’s who rejected a rehire offer within thirty days of the rejection
- You should keep documentation for evidence purposes, including written re-hire offers, written records of rejection, and written records of the attempts to hire similarly qualified people
2 The business must maintain documentation to rely on this exemption.

The information, opinions, and advice in this blog post are provided for educational purposes only and do not necessarily state or reflect those of Bluevine and/or its partners, including Celtic Bank. Neither Bluevine nor its partners are responsible for the accuracy of any content provided by the author(s) or contributor(s). For information about Bluevine products and services, please visit the Bluevine FAQ page. For information about the Paycheck Protection Program, please visit the SBA’s page.