The restaurant industry is facing unprecedented change and challenges in the face of COVID-19. Some forecasts predict industry losses of $225 billion and five-to-seven million jobs over the next three months. If you’re concerned about the viability of your business — or just taking care of your team — now is the time to seek relief.
Two new pieces of legislation can help. The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act are both designed to help reduce the financial strain on America’s small businesses and take care of their employees.
Here’s a quick look at how these laws can help you and your employees weather COVID-19, plus several links to help you take action.
How the CARES Act Helps Restaurants
The $2.2 trillion CARES Act offers wide-reaching regulations, loans, and grants designed to help small businesses and your employees as well as major corporations and individual taxpayers. Details of the CARES Act are emerging from the IRS, Department of Labor, and Small Business Administration now, but here’s a quick overview of what is most relevant to restaurateurs.
The three most important aspects to know about are:
- Refundable payroll tax credits to give business owners an incentive to keep employees on the payroll. Certain employers are eligible to have 50 percent of what they spend on wages refunded in the form of a tax credit — up to $5,000 in per worker.
- Delayed payment of social security taxes to decrease the short-term cost of paying employees. Instead of paying the 6.2 percent employers’ portion of social security taxes each quarter, most employers should have the option of delaying 50 percent of the payments until December of 2021 and the remainder until December 2022.
- Paycheck Protection Program loans from the SBA to give small businesses easier access to working capital. The CARES Act expands the SBA’s 7(a) loan program to businesses that are affected by COVID-19. Eligible businesses may receive larger loans and easier approvals when applying for the SBA-backed funds.
The CARES Act also includes new options for SBA loan forgiveness, increased business interest expense deductions and more that could help restaurants in this challenging time. You can find more information here.
Quick Overview of the FFCRA’s Paid Leave and Tax Credits
The FFCRA provides employees of most small businesses with paid leave, either to address their own health needs or to care for family members. And it gives restaurant owners refundable new payroll tax credits designed to immediately provide dollar-for-dollar reimbursement for the cost of providing Coronavirus-related leave to your employees.
FFCRA can enable you to keep your workers on the payroll, while also ensuring that your employees are not forced to choose between their paychecks and the things they need to do to keep their families healthy, protect public health, and combat the virus.
If they’re forced to miss work to care for themselves or a family member, employees can receive sick leave compensation for up to two week’s pay. And employees who are forced to stay home to care for a child can receive two-thirds of their normal pay for 12 weeks.
According to the IRS, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes to take immediate advantage of the paid leave credits. If those amounts are not sufficient to cover your cost of paid leave, you can seek an expedited advance from the IRS by submitting a streamlined claim form.
You can find more information on eligibility and benefits here.
Who Does the FFCRA Apply to?
FFCRA applies to most small businesses with fewer than 500 employees. However, if you have fewer than 50 employees, you are eligible for an exemption if complying with the leave requirements would jeopardize the viability of your restaurant. More details are forthcoming from the Department of Labor and IRS on this, so it’s important to keep up with the updates.
Remember that employers are required to give their employees notice of their rights under the act by posting this poster from the Department of Labor in their place of business, or by providing a copy to employees.
The IRS and Department of Labor will continue to update details about required paid leave and taking advantage of FFCRA tax credits. We recommend checking with your legal advisor, accountant, or other professional advisors for details on how the new laws impact your business or insights into how they can help. If you use a payroll service provider, take time to speak with them to understand how they’re handling FFCRA and CARES Act updates and any changes you need to make.