General Overview

Employee retention credits (ERC), which were originally created in the CARES Act, are intended to give employers an incentive to keep people employed during these uncertain times.

How did the recently passed legislation affect the credit?

The new COVID legislation extends and expands the credit. Under the recently enacted legislation, the credit amount has been increased as an incentive to keep employees on the payroll.

What are the updates to the eligibility requirements?

• Your company must have had a decline in gross receipts of more than 20% (previously 50%). You can also now use prior quarter gross receipts to prove a decline (instead of receipts from the same quarter last year).

• “Qualified wages” for employers with 500 or fewer full-time employees include all wages paid to employees during those quarters (up from 100 full-time employees).

• “Qualified wages” for employers with more than 500 full-time employees is defined as: wages paid to employees for the time they are not providing services during a quarter where the business operations are fully or partially suspended due to COVID-19 circumstances (up from 100 full-time employees).

• New rules have been created which allow new employers (started in 2019 or later) to be able to claim the credit.

• New rules have been created which allow new employers (started in 2019 or later) to be able to claim the credit.

• Retroactive updates to eligibility – if you received a PPP loan from the first round, you may still qualify for the ERC with respect to wages that are not paid for with PPP proceeds.

What are the specifics of the credit?

Beginning on January 1, 2021, and continuing through June 30, 2021, the credit will:

• Be available to offset 70% of each employee’s qualified wages (up from 50% offered in the CARES Act).

• Offset qualified wages up to $10,000 per employee per quarter (up from $10,000 per year).

• Allow group health plan expenses to be considered qualified wages, even when no other wages are paid to an employee.

• This means that the maximum amount of ERC available per employee is $14,000 ([$10,000 for Q1 + $10,000 for Q2] x 70%).