Paycheck Protection Program (PPP)

Paycheck Protection Program Loan Overview

The Paycheck Protection Program (PPP) is an initiative that was implemented with the recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP allows qualified employers to receive 100% federally guaranteed, forgivable loans to continue running payroll if impacted by the Covid-19 emergency. Small businesses can use the PPP loan to cover payroll costs (including benefits), interest on mortgage obligations, rent, and utilities. 

The PPP loan amount can be up to 2.5 times the company’s average monthly payroll costs up to $10 million. The average monthly payroll cost is calculated by looking at the companies payroll cost over a particular set of months depending on when the company began doing business. For most companies, you will calculate the average based on (i) your last twelve months of payroll or (ii) your full year 2019 payroll. We currently recommend that you prepare both calculations and consult with your lender for guidance on the appropriate time frame, as there are conflicting views on this. For new or seasonal businesses, please see the PPP Loan Checklist to locate the applicable time period for your business.

Key points to remember when running your average monthly payroll calculation:

  • Compensation should be capped at $100,000 per employee
  • Benefits can be added in addition to compensation amounts (and are not subject to the $100,000 cap)
  • Compensation must be attributed to U.S. employees
  • Excludes 1099 contractors, who are separately eligible for PPP Loans

For more information on PPP loan eligibility requirements and how to calculate your average monthly payroll, please visit this this PPP Loan Checklist from the U.S. Chamber of Commerce.

Accessing the Built-in Covid-19 Payroll PPP Report

Rippling has created a built-in report to assist in calculating your companies average monthly payroll costs for the PPP loan application.

To access the Covid-19 Payroll PPP Report: 

  1. Navigate to Reports on the left hand side panel
  2. Select the Built-in Reports tab
  3. Select the COVID-19 Payroll PPP Report
  4. Under Dates, toggle to “Last 12 Months” or “Previous Calendar Year”
    • Please note that Rippling built two reports: (1) a full-year 2019 report and (2) a last twelve-months report, which will start calculations for the preceding 12 months. We recommend that you consult with your lender to determine their preferred time period for calculation.
  1. Click Run Report
  2. The “Monthly PPP-eligible costs” will be your “Average Monthly Payroll Cost.” Multiply this number by 2.5 to determine your max PPP loan eligibility. The total loan amount cannot exceed $10 million.

Details of Our Methodology

  • Base Columns:
    • Gross Pay: Employee Gross Pay
    • Imputed Pay (if applicable for your company): Taxable non-cash compensation, e.g. fringe benefits
    • Total Employer Taxes: All taxes paid by the employer (e.g. unemployment taxes, employer portion of FICA etc)
    • Federal Employment Taxes After Feb 15th: Employee and employer FICA taxes and employee federal taxes
    • Total Employer Retirement Contribution: Contributions to 401(k) plans
    • Total Employer Health Insurance Contribution: Contributions to medical, vision, and dental
  • Summary Columns:
    • Aggregate payroll costs with 100k max: MIN(100k, ‘Gross Pay’ – ‘ImputedPay’ + ‘Total Employer Taxes’ – ‘Federal Employment Taxes After Feb 15th’)
    • 12-mo PPP-eligible costs: ‘aggregate payroll costs with 100k max’ + ‘Total Employer Retirement Contribution’ + ‘Total Employer Health Insurance Contribution’
    • Monthly PPP-eligible costs: ’12-mo PPP-eligible cost’/12

Notes and Disclaimers:

  • Rippling follows the methodology outlined in “How should I calculate my average monthly payroll costs?”, except that Rippling does not include any of the starred (*) items in its pre-built PPP average monthly calculator. If any of the starred (*) items apply to you, please manually adjust the report or run a custom calculation using your payroll journals.
  • If you have been advised to use a different methodology, have additional payroll costs or exclusions to include (not listed above), or have taken an EDIL, please go in and manually update the report to suit your needs.
  • If you are a seasonal employer or a new company, please run a custom calculation using your payroll journals.
  • Please note that we are unable to help you calculate your monthly average payroll if we do not have your payroll records for the applicable time period.
  • We recommend that you include a copy of the “Detailed Methodology” with your application.

For more information on the Paycheck Protection Program, please review the Treasury Department’s fact sheet for borrowers and the Treasury Department interim guidance.