Instead, in the CARES Act, Congress decided that “full-time employees for ERC purposes would be used as defined in the Affordable Care Act (ACA). According to the ACA, a “full-time employee (FTE) is an employee who worked 30 hours a week or 130 hours a month. Wages paid to employees for the hours for which they provided services are not considered qualified wages for the purposes of the employee retention credit. Calculating the Employee Retention Credit (ERCC) is one of the most successful tax measures to help small and medium-sized businesses.
In addition, any qualifying wages that are taken into account for the purposes of the employee retention credit cannot be considered for the paid family medical leave credit under section 45S of the Internal Revenue Code (the Code). Its employees provided services during the first part of the calendar quarter, but then stopped doing so due to the suspension of operations; however, Employer R continued to pay normal employee salaries throughout the quarter, including the period during which they did not provide services. For these employers, the amount of the credit must be distributed among the members of the aggregate group based on each member's proportional share of the qualifying salaries that give rise to the credit. The original IRS rule was that receiving a PPP loan would disqualify an employer from receiving the employee retention credit.
Eligible employers are entitled to an employee retention credit based on the qualified wages paid to their employees. For companies that had an average of more than 100 full-time employees, qualified salaries are the salaries that are paid to an employee for the time the employee is not providing services due to the suspension of operations or a significant decrease in gross revenues. For employees who are not providing services due to the closure of their branch office, but who receive 50 percent of their normal hourly wage, employer T may treat the wages paid as qualifying wages for the purposes of the employee retention credit. Schedule a free consultation on the employee retention credit to see how much of the employee retention tax credit your company qualifies for.
For administrative staff whose hours were reduced by 40 percent but who are paid 100 percent of the normal wage, Employer T can treat 40 percent of the salary paid for the time these employees don't provide services as qualifying wages for the purposes of the employee retention credit. These salaries are paid in accordance with existing leave policies, which represent benefits accrued over a previous period in which employees provided services and are not salaries paid for the time when employees did not provide services. Payments made in connection with the termination of a former employee's employment relationship are not qualifying wages because they are payments from the previous employment relationship and, therefore, cannot be attributed to the time during which the employee retention credit can be requested. It is not reasonable for an employer to consider that an employee's working hours have been reduced based on an evaluation of the employee's productivity levels during the hours the employee works.
Reasonable methods include the method (or methods) that the employer uses to measure the right of exempt employees to intermittent or reduced leave under the Family and Medical Leave Act, or the method it uses to measure the right of exempt employees to paid vacation and the use of such vacation according to the employer's standard practices.
