Navigating the Paycheck Protection Program for Construction

Posted by Jim Miller on June 23, 2020

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Many construction companies that applied for and are now receiving funding from the Paycheck Protection Program (PPP) are having to navigate the complexities around the forgiveness provisions within the program.  The date the loan gets funded begins one of the most critical components of the PPP loan for contractors, an 8-week forgiveness period. The PPP loan has a forgiveness provision for the amount of proceeds used to fund eligible costs incurred during the forgiveness period comprising of payroll and certain non-payroll costs. The following are key items to know about PPP loan eligible costs:  

Payroll Cost

  • At least 75% of the funds for the 8 weeks immediately after you receive PPP loan
  • Salary, wages, commission or similar compensation is not to exceed $100,000 annualized, which is $15,384 for the 8 weeks
  • Payment required for provisions of group health care benefits, including insurance premiums. This includes only the net of what the company pays for Medical, Vision, and Dental insurance (i.e. the Firm’s contributions).
  • Payment of any retirement benefit such as a 401(K) company match during the 8 week period (not the employee contributions)
  • Payment of state unemployment taxes

Non-Payroll Costs

  • Maximum 25% of the funds received from PPP loan
  • Rent according to the lease for 2 months  
  • Utilities for 2 months, which includes water, electric, gas, telephone and internet
  • Interest expense for 2 months on the debt secured by real or personal property


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Tracking Eligible Costs

On the surface, tracking the eligible costs and calculations can seem straightforward.  However, there’s complexity around the incurred and paid provision, including benefits and taxes that are either paid quarterly or annually that relate to employee wages incurred and paid during the forgiveness provisions.  To navigate these complexities, companies will want to keep tight records, talk with their professional network and in some cases make interim payments to ensure proper treatment and inclusion in the forgiveness calculation.

Confirming Payroll Levels Are Maintained

Once the eligible cost requirements are met, a company must ascertain that certain payroll levels are maintained. This includes employing a monthly average full-time equivalent (FTE) count during the 8-week forgiveness period as compared to two measurement periods at the choice of the company. The two measurement periods are:

  1. February 15, 2019 through June 30, 2019
  2. January 1, 2020 through February 29, 2020

Contractors can divide the monthly average FTE count over the 8-week period and divide it by the measurement period average monthly FTE calculation, likely the lessor of either (1) or (2). Anything less than 100% calculation will reduce the amount of eligible costs submitted for forgiveness.

Potential Reduction

Finally, there is potential reduction in the eligible forgiveness amount related to any reduction in total salary or wages of employees during the forgiveness period that exceeds 25% of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period, subject to certain adjustments. 

As time moves on, we expect there to be a lot of clarifications made by the Small Business Administration and recommend construction companies consult their professional networks to ensure they properly calculate the amount available for forgiveness.

Interested in learning more on how software can help contractors manage evolving legislation? Contact our construction experts for more information.  

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