PPP Loan Forgiveness Application - Test #2 FTE Reduction


UPDATED 5/22/2020

Forgiveness Reduction – Test #2 FTE (Full Time Equivalent Headcount)

This test on the PPP Loan Forgiveness Application looks to see if you reduced headcount (FTE) after 2/15/20.  If you did reduce FTE’s but restored them by 6/30 then you are OK and don’t lose any forgiveness related to headcount.


This test is called the FTE Reduction Safe Harbor  

There are two ways to calculate FTE’s (borrower's choice): 1) Take # hours worked divided by 40  (example:  12 hours worked / 40 = .3 FTE) OR 2) Use .5 FTE for any worker that works less than 40 hours

Option 2 Example:  If you have 2 people that work 40 hours / week and 3 people that work 25 hours / week your total FTE is 3.5 (2 FT + .5 + .5 + .5 PT) To determine whether your loan forgiveness is reduced you need to look at FTE’s over 3 pay periods: a) Look at Average FTE’s between 2/15/20 and 4/26/20 b) Look at FTE’s in pay period inclusive of 2/15/20 c) Look at FTE’s on 6/30/20 If a is less then b (you reduced FTE after 2/15) then look at 6/30/20.  If FTE on 6/30 is equal to or greater than FTE on 2/15 then your loan forgiveness is NOT reduced.



After this test if you did have a headcount reduction (test NOT OK) then you proceed to calculate the FTE Reduction quotient which requires you to look at some different date ranges: 1) Look at average FTE's either (Borrower's choice): between 2/15/19 and 6/30/19 OR between 1/1/20 and 2/29/20   Note: Seasonal works have 3 different date range options - reach out to us directly if you need these date ranges. 2) Add up your FTE's during the Covered Period (or Alternative Covered Period).  You would have this information when you completed Test #1 - Salary Reduction which we reviewed yesterday. 3) Divide #2 / #1 Example:  You choose the average FTE period between 1/1/20 and 2/29/20 where you had an average of 10.0 FTE's Your FTE's during the Covered period were 8.5 FTE's 8.5 / 10 = .85  This is the FTE Reduction quotient. Your Loan forgiveness will be reduced by this amount.  Example: If your PPP forgiveness calculation was $50,000 then your PPP loan forgiveness maximum will be $42,500. 

Just another easy calculation! (haha) There are still many open questions that the SBA will be issuing guidance on soon (hopefully.) Rest assured, the EDGe team is reviewing this application and guidance closely and we will continue to provide updates and clarifications.  There are many more details on how this application works (assuming it doesn't change) that I will cover in future emails. The EDGe team of experts now offers PPP loan forgiveness tracking for your business.   If you need to talk through specific options for your business, Molly, Paula, and I are here to help.  Schedule a 30 minute consultation via Zoom where we will discuss your specific business situation for only $49.   If you have any questions, feel free to reach out to any of us.  And keep checking our emails, blog, and social media for update

Email us at hello@edgebusinessplanning.com to sign up or to get more information.

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