I hope you, all of your loved ones, and your work families are safe and healthy. As I write this in the last week of April, numerous owners are faced with extreme business challenges. Approximately 50% of OD owners have qualified and or received the first round of their PPP. Our first reaction is a sigh of relief, but as offices have begun to bring their staff back to work, a major dilemma has arisen.
The original goal of the PPP was to support business payroll and other essential expenses during this time of dramatically decreased revenue. A forgiveness option is granted if you bring your staff back at roughly the same number of full-time equivalents and payroll. If the guidelines are not met, the forgiveness amount would be reduced and would roll into a small interest short-term loan. Our government's intentions were in the right place to support small business and lessen the unemployment burden; however, this has created an underlying problem that has been thrown in front of us.
Owners began to call staff back to work to meet the forgiveness guidelines, and many of them were met with a surprising response. Some examples are:
Why would I want to come back to work? I am making more money staying at home on unemployment.
I hate you for making us come back to work!
You only care about your business and your profits.
Owners could not believe this and were extremely hurt. Nobody had the intention of hurting their work families during this challenging time. In addition, the PPP money received would only last them approximately 6 to 8 weeks due to the massive decrease in revenue. Would they have to shut down and furlough their work families again in June, July or August?
In my 19 years of owning companies I have always strived for a win/win solution, as my past mentors have preached. My team and I anticipated this problem about five weeks ago. We believe one possible solution lies in understanding the numbers. Step one is understanding how much your employees are being paid to stay at home. Depending on your state, employees are getting anywhere from $21 to $30 per hour on unemployment. For our example we will use an employee who earns $20 per hour and works 40 hours per week in the state of Rhode Island. Their normal gross wages come to $800 per week. Rhode Island unemployment pay is 60% or $480 per week (up to a maximum of approximately $580 with zero dependents). The federal government, under the Cares Act, is providing an additional $600 on top of the state benefit per week. As a result, the employee is receiving $1080 per week for staying at home potentially until the end of June. I could not blame them for being upset.
A possible win/win solution is available and could help the business’ capital dollars last longer into the summer. Evaluate bringing your staff back part-time, between 20 to 23 hours per week. Keep in mind this will reduce the amount of forgiveness with the PPP, but we're really looking for a win/win here. The federal guideline for full-time employment is 30 hours per week. In our example, based on Rhode Island numbers, the employee would work 23 hours at $20 per hour to receive $460 per week from the practice. They would still receive the $600 federal stipend weekly for a total of $1060 per week. This is approximately what they are taking home with expanded benefits. They would still receive regular state unemployment for the 17 hours they are not working plus and dependent benefits. As always, please check your state specifics with your CPA and your financial team.
The most important factor is communicating with your work family as you protect your business and their careers for the future. The above scenario works until the end of June and should be a win/win for everyone. I wish you nothing but the best as you maintain a healthy office culture and a weekly positive cash flow. I am always available for questions. Go build your empire and stay safe!
Dr. Scott A. Colonna is a senior partner at Uppercut Consulting and Westminster Eyecare Associates. He is a native of New York and received his Doctor of Optometry degree from the State University of New York College of Optometry. He completed his bachelor’s degree in Biology from Lafayette College. Dr. Colonna completed internships in primary care and ocular disease at the Veterans Affairs Medical Center in Newington, CT and infant and pediatric care at Beth Israel Hospital and SUNY in Manhattan, NY. While in optometry school he traveled with the Volunteer Optometric Services to Humanity organization to provide eye care in Nicaragua. He has also been part of the Special Olympics Opening Eyes program which provides free eye exams to participants. Dr. Colonna has extensive experience in pediatric and infant eye examinations, primary care, contact lens, geriatric care, and ocular disease. He is an active member of Infant See, the American Optometric Association, and the Rhode Island Optometric Association. For questions or comments about this article, please contact email@example.com.