Emergency paid leave may be the financial hit that’s unrecoverable for a small business. A bill is in the Senate right now that may or may not deplete your cash flow as a small business. The government promises to reimburse small businesses with a tax credit, but realistically you won’t see that tax credit anytime soon. Do you have enough cash to pay employees for required leave because of COVID-19? I’m concerned, are you? Please share your thoughts! Watch to hear more of my concerns: Practical Legal Insights-20-Can Your Business Survive Emergency Paid Leave?
Our Law Firm Already Operates Remotely
How has your business operations been affected by COVID-19? For us, business as usual because two years ago, we stopped going to an actual office and all of us work remotely from home. Our services are streamlined to help you get the answers you need at your convenience. We provide free legal guidance on our website as well as our youtube channel about running a business and common mistakes to avoid. If you don’t find the answers you are looking for then you can schedule a complimentary consultation. As you know, we offer complimentary consultations by video or phone call. If you hire us, we handle all client meetings using zoom video. Once in a while, we will meet a client face to face which we have an office in Lehi to do that. Providing our services remotely has made it convenient for our busy clients who don’t have time to leave their business to meet with us at an office. This way, they can just get on a quick video call to discuss their project and then quickly return to running their business. Fortunately, this means lower overhead which means our fees are also affordable which saves the small business owner money. So, we are still here for you during this crazy time of social distancing!
Social Distancing and Small Business
Until Friday, I wasn’t really concerned about how this would affect us as a small business law firm and how we operate with our clients. My biggest concern on Friday was what am I going to do with my children, who are now required to do school online from home! Yikes, now I get to work from home and entertain my kids. However, that is not the most concerning shock of this last week. Over the weekend, an alarming bill was passed by the house and is now sitting in the senate. If that bill passes as is, how will a small business with less than 50 employees survive? Typically I am working with clients who have less than 50 employees and are not required to provide leave under FMLA or even paid sick leave. And that’s a relief to them because they run a small business. The bill that the Senate is considering applies to any business with less than 500 employees!
Emergency Paid Leave For Small Businesses Is Not Realistic
Here are the bullet points for 12 weeks of leave:
- The employee has to have worked for you for at least 30 days to get the 12 weeks of leave.
- They get 12 weeks of leave, with a guaranteed return to their job, unless you have less than 25 employees.
- You are required to pay them 10 of the 12 weeks at 2/3 the rate that they’re currently making.
Here are the bullet points for sick leave:
- Applies to all employees, whether they’ve only worked an hour or a day, doesn’t matter.
- If they meet the requirements, they get two weeks of paid sick leave. If they are full-time, it’s their full rate. If they’re part-time, it’s prorated to their part-time rate.
Employees can get the 12 week or sick leave if:
- they have been diagnosed with Coronavirus,
- they need to go see a doctor, they have an appointment with a doctor to get diagnosed,
- they are complying with a government order to be quarantined,
- they are caring for a family member who’s been diagnosed, or
- they’re caring for a child whose school has closed.
Increase Payroll Costs For Leave Could Drain Your Cash Flow
The government is promising a tax credit to you, the business owner, for the additional payroll costs you will have to payout. My biggest, overarching concern, is your payroll cost. Cash flow is like a roller coaster, up one day and down the next. Business owners, you know what I’m talking about, you might have sleepless nights not knowing for sure you’re going to have cash in the bank to cover the payroll this week. That’s the reality. So now, the reality is that you might have to incur additional payroll costs that you don’t have the cash flow to do. So how are you going to pay for it?
Tax Credits Doesn’t Mean Cash On Hand To Cover Today’s Payroll
The government says they’re going to reimburse you with tax credits. What is not clear is will that tax credit happen with your quarterly payroll taxes or is it next year when you’re filing your taxes for 2020, a year from now? Or will there be a way for you to get reimbursement immediately? It’s not clear. It’s also not clear on what documentation you’re going to have to submit to the IRS in order to get that tax credit, and if you don’t do it right, you risk not getting the tax credits. You don’t want to mess up. Will your employees be required to give you a doctor’s note proving the employee, or their family member, has actually been diagnosed with coronavirus? What is going to be the documentation you have to submit to get the tax credit? There are a lot of questions that are not answered right now and it is scary. What are your thoughts?
Watch to hear more of my concerns: Practical Legal Insights-20-Can Your Business Survive Emergency Paid Leave?