How to Calculate Employee Retention Credit (ERC)

The Employee Retention Credit (ERC) is a program designed to help businesses retain their employees during the economic downturn caused by the COVID-19 pandemic. The ERC calculation is based on total qualified salaries, including health plan expenses paid by the employer to the employee. The ERC is calculated quarterly and is equivalent to 50 percent of the “qualifying salary” of each employee of an eligible employer. The main distinction between the two categories is that the category of 100 full-time employees or less allows the salaries of all employees to be counted, even if they have not been prevented from providing services, and the category of more than 100 full-time employees allows salaries to be counted only for employees who cannot provide services due to the COVID-19 Order or due to a significant decrease in gross income.

The 60 percent of the salaries that Employer T pays to administrative staff for the hours during which employees actually provide services are not considered qualifying wages for the purposes of the employee retention credit. The original instruction for the ERC said that you couldn't apply for the credit if you applied for a Paycheck Protection Program loan. Similarly, the methods that the Department of Labor has prescribed for determining the number of hours during which an employee with an irregular schedule is entitled to paid sick leave under the FFCRA would be considered reasonable for this purpose. Payments, including severance payments, made to a former employee after the termination of the employment relationship are not considered qualifying wages for the purposes of the employee retention credit.

The ERC intended to give credit to this population of business owners for retaining their employees during the economic twists and turns of the pandemic. Therefore, employers O and P are considered a single eligible employer with more than 100 full-time employees for the purposes of the employee retention credit. The minister's salary and stewardship allowance do not constitute salaries within the meaning of section 3121 (a) of the Code and, therefore, are not qualified salaries for the purposes of the employee retention credit. Only amounts paid to employees for the time they did not provide services and at the rate of pay in effect before any increase would be considered qualified wages.

The fact that an employee has terminated their employment relationship is based on all facts and circumstances, even if the employer has considered the employment relationship to be terminated for purposes other than continuing to pay salary. Even though the ERC program was closed, companies that meet certain requirements still have an opportunity to apply for credit retroactively. To qualify as a full-time employee, companies must verify if their full-time worker falls within IRS definition. Now that you know how to calculate qualifying wages for employee retention credit, it's time to apply for credit for which you qualify. This meant that any money paid to employee was eligible for ERC regardless of whether they were working or not. Because employees' working hours have not changed, none of wages that Employer W pays employees is qualifying wages.

Although clubs are closed and there is not enough administrative work to employ management employees full time, they continue to perform some similar accounting and administrative functions.

Dustin Hafferkamp
Dustin Hafferkamp

Incurable pop culture enthusiast. Unapologetic pop culture practitioner. Hardcore travel advocate. Certified tv enthusiast. Lifelong food junkie.

Leave Message

Required fields are marked *