Startups: Not Doing PPP? Do “Workshare” – It Can be a Better Deal Than PPP

For those startups that missed the Paycheck Protection Program (PPP) and need to now reduce burn, but do not want to lose their employees, “Workshare” is the PERFECT program for your startup and your employees.

Workshare is a State program (CA, NY and MA have very generous ones) whereby a startup can reduce the hours and compensation of their employees by up to 60% and the employees can collect unemployment benefits for the difference. There are some minor requirements, such as classifying employees in groups and treating all of the employees in those groups the same, but the programs are remarkably flexible.

A startup can reduce the employees’ time and compensation up to 60% and the employees can collect unemployment insurance to make them whole.

This was always a good deal, but a much better deal for lower paid employees, as a higher percentage of their reduced wages would be replaced by unemployment insurance.

With the $2.2T CARES Act, though, anyone collecting unemployment can collect an additional $600 per week. A GAME CHANGER!

Let’s take the example of a MA employee making $85K per year and their hours and salary are reduced by 60% or $45K per year:

Weekly Pay from Startup (after reducing by 60%)
Unemployment Benefit
Additional CARES Act Benefit
TOTAL Weekly Pay (payroll plus Workshare)

TOTAL Weekly Pay (payroll only)

A few caveats:
  • The amount of weekly unemployment benefits varies by states.
  • The employee does not pay state taxes on unemployment in some states, like CA (MA and NY tax unemployment benefits).
  • The employee always pays Federal taxes on unemployment benefits.
  • The Federal taxes on unemployment benefits are less than the Federal taxes on regular payroll.
  • There may be loan forgiveness issues if you do PPP and Workshare.
  • The additional $600 is available only through July 31, 2020.
  • The regular unemployment benefit can be collected for 39 weeks.

Tuesday, April 21st: PPP 2.0. Great Comments from PPP Facebook Group

PPP just got another $250B – do not wait. Apply immediately.

Below are some very interesting and insightful comments made on the following PPP/EIDL Facebook groups in the last 24 hours.

Divvy/Cross River PPP funded into my bank this morning. 12k as promised. After all of the applications, the paperwork, the frustration with them running out of funds, and after checking my account several times a day for weeks this feels like a huge win! Huge shout out to Divvy/Cross-River. They were so easy and all done in 10 days. My biz bank Wells Fargo – well lets just say we are closing our accounts.

Woke up this morning full ppp funds deposited and eidl grant advance of 3k deposited . God is good
Single employee LLC no payroll or 1099 l. Went thru getdivvy/cross river bank for ppp. And my eidl application was done 3/31-4/1 cant remember exact date

Got a response from BBT/Truist….didn’t think they were moving forward with funding until new Cares package came through.

SQUARE is now accepting applications. Seems like a better option than going through traditional banks and Paypal. I briefly looked into the application, seems really easy and straightforward compared to other banks. I’ve signed up with Citi, but they are giving me a headache and robotic response. Nothing approved through them and they are claiming my name has a “credit freeze” which I don’t.

If anyone did not get a loan the first round of PPP, try Kabbage. I applied with them the week after the program started and I signed final papers last week. Funds deposited this morning. I tried to apply with Wells Fargo and it was ridiculous so I just starting sending in applications.

Just got Approvals from Lendio, for my company, and at the same time my wife’s company did too, a few friends that applied there also all got approvals in the past 30 minutes…. No other details, it just says that it’s been approved.

The senate just mentioned on the floor that the next bill coming in a few weeks will involve offering leniency on the 8 week time frame to spend the PPP funds. They realize businesses are having a difficult time planning when they aren’t even sure when they’ll be allowed to reopen. This would be great!

Hey guys I’m like many of you guys waiting for banks to approved my PPP loan. Chase is my bank. But on a side note, try applying for PayPal. I applied yesterday for the hell of it and hours later got an approval via docu sign. Signed agreement and now waiting for confirmation. Today like many others chase sent a generic letter out to me also.

Applied on Thursday for PPP loan through PayPal. Finished app no email no interaction at all! Just read that one guy applied last night and got focusing papers this morning!? Did I do something wrong!! I’m desperate I need some guidance. I’m pregnant and have a son I’m really over whelmed and funds are getting low. First time business owner blues 

I personally had a banker tell me that they would get my loan done if it were over $100,000. So yes big businesses were who banks put preference first. More money for them. This was when PPP first opened up and pot was full.

While some of you stress out, here is a link to check when your payment is coming for the stimulus check. ($1200 per person)

PPP Loan officer explained to me if you take the ppp you can’t get unemployment . I think a certain amount is supposed to be used to pay you & your employees & if you get unemployment it’s like being paid twice. Just thought I’d share

What is unBookkeeper?

unBookkeeper is Accountalent’s bookkeeping solution for early stage startups.

unBookkeeper – what’s the story with the un?

  • Un means “not”.  We feel that early-stage startups may not need a bookkeeper, as bookkeeping has evolved and much of it can be done electronically.

How does it work?

  • We spend about 90 minutes with you via Zoom and we implement QuickBooks Online (QBO).
  • We (actually you, with our direction) electronically connect your bank, credit card, payroll, etc. accounts to QBO.
  • We electronically upload all of your historical transactions, from inception, into QBO.
  • We customize the QBO chart of accounts, financial statements, etc. to your business.
  • We train you to be an expert in QBO (trust us, we have a 100% success rate on this one!).

What happens next?

  • We set up “rules” in QBO so many of the transactions (Gusto, Brex, etc.) are electronically and automatically entered into QBO.
  • You spend about 20 minutes per week accepting the electronically entered transactions (checking a box in QBO).

What else does Accountalent do for us?

  • We do a thorough quarterly review.
  • We are always available to pinch-hit or troubleshoot.

What happens if this becomes too much work for us?

  • When the transaction volume becomes too much, we transition you to a best-of-breed cloud-based bookkeeping service, like Pilot.

How much does this cost?

  • $0 if you are an Accountalent tax client.
  • $650 if you are not an Accountalent tax client.
  • No monthly fee.
  • No consulting/hourly fee (even if you mess it up badly and we need to spend a ton of time fixing it).
  • No annual fee.

PPP For Startups – What We Have Learned the First Week

The Paycheck Protection Program (PPP) is a week old.  This is what we have learned in the first week:

  • The fever pitch has subsided – there was a lot of anxiety about this being a “first-come-first-serve” program and $350B would not last long.  As of today, there was about $125B committed and DC is working on appropriating an additional $250B.

  • The payroll companies finally fixed their reports to correctly calculate the loan amount.

  • Most of the banks got their act together and worked out the kinks in their systems.

  • Seems to be momentum not to take the PPP money if a Company does not need it – VCs leading this movement and it is building steam.

  • A lot of businesses are developing strategies to maximize their “forgiveness” amount/period by delaying their PPP Note until they are ready to recall their employees (unemployment amount was “juiced up” by $600 per week, so many workers are making more money unemployed).

  • A lot of businesses are developing strategies to coordinate the SBA EIDL loan and PPP.  First $10K of EIDL is forgiven, no questions asked.

  • A lot of application problems if there is a 20%+ foreign shareholder without an SSN or ITIN.

  • Many firms have submitted more than one application – a cardinal sin.  Lenders have been good about pulling the application if contacted, though, as most have not submitted it to the SBA, yet.

  • Not much guidance available yet for independent contractors/sole proprietors.  They can start applying on Friday, April 10th.  Many questions on the present online applications make no sense for independent contractors.

  • The following very interesting reps were in our BOA PPP Note that we just received:
    • Borrower will not outsource or offshore jobs for the term of the Loan and two (2) years after completing repayment of the Loan.
    • Borrower will use the funds of the Loan to retain at least 90% of its workforce, at full compensation and benefits, until September 30, 2020.

  • Hearing about more banks allowing non-customers to apply for the PPP with them.  If you are looking for one, shoot us an email.
    • Our prediction: in a few weeks there will be tons of banks advertising for this business.  They get 5% for most of these loans.  So, the program should grow to $600B – at 5%, banks will receive about $30B in fees for a 100% guaranteed loan that will probably be forgiven in 90 days.  They never lose!

  • Let us know if we can help.

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