May 19, 2020 | COVID-19, MBE CPAs

Last Updated: May 27, 2020

PPP Forgiveness Calculation Guidance

We’d like to provide you with an update on recent communication from the SBA related to the PPP forgiveness calculation. To read the official guidance in its entirety, please visit their website here.

Here are the top 8 takeaways from this guidance.

  • 8-week measurement window:
    • Requests for forgiveness will be based on the wages incurred in the 8-week window NOT what was paid.
    • To help with this calculation there is an option to delay the start of your 8-week window to coincide with your pay periods. Per the SBA instructions, if the borrower received its PPP loan proceeds on April 20, and the first day of its first pay period following its PPP loan disbursement is April 26, then the first day of the alternative payroll covered period is April 26 and the last day of the alternative payroll covered period is June 20.
  • Owner’s compensation:
    • Cannot exceed 8 weeks’ worth of 2019 compensation for any owner-employee or self-employed individual/general partner, capped at $15,385 per individual.
  • Seasonal employers:
    • In the case of seasonal employers, they will have a 3rd option available for determining their baseline FTEs, a 12-week period between May 1, 2019, and September 15, 2019.
  • Salary/hourly wage reductions:
    • According to the SBA guidance, loan forgiveness is reduced by a decrease in employee’s salary or hourly rate.
    • The employee’s salary or hourly rate will be calculated as of the first quarter of 2020 and compared to the rate paid during the 8-week window. If you maintained or increased rates of pay during the 8-week window, then your forgiveness will not be affected.
  • Full-time equivalents (FTEs) defined:
    • The SBA defined that an FTE is based on a 40-hour workweek. The FTE for each employee is the average number of hours paid per week, divided by 40, and rounded to the nearest tenth.
    • The maximum for each employee is capped at 1.0.
    • A simplified method that assigns a 1.0 for employees who work 40 hours or more per week and 0.5 for employees who work fewer hours may be used at the election of the borrower.
  • FTE reduction exceptions:
    • Any FTE reductions based on the following do not reduce the borrower’s loan forgiveness.
      • Any positions for which the borrower made a good-faith, written offer to rehire an employee during the covered period or the alternative payroll covered period which was rejected by the employee.
      • Any employees who during the covered period or the alternative payroll covered period were fired for cause, voluntarily resigned, or voluntarily requested and received a reduction of their hours.
    • FTE safe harbor:
      • If you meet the 2-part safe harbor conditions then you will be exempted from a reduction in loan forgiveness because of FTEs.
        • The borrower reduced its FTE employee levels in the period beginning February 15, 2020, and ending April 26, 2020; AND
        • The borrower then restored its FTE employee levels by no later than June 30, 2020, to its FTE employee levels in the borrower’s pay period that included February 15, 2020.
      • Documentation:

We encourage you to reach out to your MBE service provider with any questions or to discuss your PPP loan forgiveness plan.

In addition, if you have questions with regard to HR related matters including proper documentation of the above FTE reduction exceptions, please contact Workforce Solutions at

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