Presented by: Brad Steele, Private Club Consultants
During a frantic 14-day period in March, the United States Congress passed new laws to provide benefits and directives affecting U.S. businesses in response to the current pandemic. The U.S. federal government has passed three laws now to help businesses and employees, and they have poured approximately 2.5 trillion U.S. dollars into the economy in the last month. (To place this into perspective, the government typically has a deficit of one trillion dollars each year.)
Many of these initiatives directly impact the club industry. Brad Steele of Private Club Consultants delivered an information-packed overview of these benefits as they relate to clubs, which are offered under “Phase Two” and “Phase Three” of the federal government relief response including:
Paid Family and Medical Leave Act
Paid Sick Leave
The Deferred Employer Payroll Tax
The Employee Retention Tax Credit
The Payroll Protection Program (PPP)
The Economic Injury Disaster Loan (EIDL)
Federal increases to state unemployment benefits
Steele has provided the bulk of the information your club needs to know regarding these benefits and tax credits in these two handouts: Phase Two and Phase Three. These handouts address each of these provisions with definitions, eligibility, issues and expectations.
During his interactive Hangout discussion, Steele addressed several questions coming in from the participants and clarified some things for club professionals: whether or not their club qualified for certain benefits, how they could find out, and how they could help their employees during this turbulent time.
Here are some of the key points that are important for all clubs to understand:
Clubs Can Benefit from Many of These Initiatives. From the Payroll Protection Program? Not So Much.
Steele stressed the point that only a small percentage of clubs could actually qualify for the Payroll Protection Program (PPP). At the end of the day, most private clubs are not eligible to receive a PPP loan, unless that club is a 277 – and even then, it can still be difficult to get it because of certain qualifications that must be met. No 501(c)(7) clubs are eligible. So, as a club, give it every consideration before you apply. The PPP loan is only eight weeks (two months). Is it worth your time and energy to apply if there is a strong chance your club will not receive it or won't be able to have the loan forgiven because you were not eligible?
Phase Three of the federal government assistance legislation provides other options for individual clubs that are far better for your employees and for your club’s financial bottom line.
What about the Economic Injury Disaster Loan (EIDL)? It is true, that 501(c)(7) clubs are eligible for EIDLs. However, in order to qualify for this loan, your club would need to show economic injury. If your club gets the loan, it will need to be repaid.
There is a $10,000 immediate grant for payroll offered under the EIDL program, and while $10,000 is considered quite a large amount for an individual or family, you must consider: How much will $10,000 go towards helping payroll of a private club?
With all of these benefits available for businesses and employees, you should always ask yourself: What is the work involved? What are the potential liabilities? Then, compare that to the other options available to your club.
Clubs Need to Ask Themselves the Tough Questions: What Is Best for Your Employees?
Clubs often operate as a family, and that means taking care of your employees during tough times. Your immediate inclination might be to keep all of your employees on payroll for as long as possible.
Phase Two implements the requirement for paid sick leave and paid family medical leave for your employees. These are new and have never been mandated before by the federal government; it has typically been left up to the states or to the employers to provide these benefits. Paid Sick Leave offers two weeks of benefits as long as certain qualifications are met, while Paid Family Medical Leave (FMLA) is paid for up to 10 weeks.
Phase Three also offers many benefits. All clubs are entitled to defer the payment of their Social Security payroll taxes on wages, which must be paid back over two years — 50 percent at the end of 2021 and the rest by the end of 2022. To keep employees on payroll, there is also the Employee Retention Tax Credit that clubs can receive, equal to 50 percent of “Qualified Wages,” to offset their payroll tax on wages.
Certainly, strong consideration should be given to the new federal increase to state unemployment benefits. The federal government has promised an additional $600 per week for up to four months, while also extending state unemployment benefits for an additional 13 weeks, resulting in a total of 39 weeks. This additional federal government assistance of $600 per week ends on July 31, 2020.
This level of compensation may exceed what your club is able to offer by keeping employees on payroll. Taking advantage of unemployment can help free up payroll money for employees who are not being supported by the federal government and extend the club's resources for other costs.
There are several ways that your club can assist employees who may be laid off as a result of this pandemic. First, provide a severance package that can help the employee manage until the unemployment benefits kick in. You can also include health insurance coverage in that severance package, so they do not lose that valuable insurance at a time when they need it most. Many clubs have also initiated employee relief donation programs to collect money to help out their employees who may be financially, adversely affected by the pandemic. These funds can be incorporated into the severance package, as well.
Secondly, be very clear with your employee when you are discussing their lay-off, that they are being let go as a direct result of the hardships brought on by the Covid-19 pandemic. They can then, in turn, communicate this very clearly with the unemployment office and receive the right benefits.
Finally, if you are going to consider lay-offs for your club, it is better to make this decision sooner rather than later. Millions of requests are pouring into the unemployment offices each week, and it is not an exaggeration that up to 10 million or more American workers could file for unemployment within the next month. You want to get your employees in line as fast as possible, so that they can be in the best position to receive the most government financial assistance.
Keep in Mind: Phase Four Is Coming.
Another wave of federal government assistance legislation is expected to take the form of “Phase Four” to continue to aid businesses and workers in the United States. This next phase should possibly provide an expansion of dollars in aid, as well as an expansion of federal unemployment benefits.
About the moderator: Brad Steele has been an integral part of the private club industry for over 15 years. He started Private Club Consultants (PCC) to provide in-depth legal and operational answers for America’s top private clubs. Over the years, Brad has become one of the leading resources for the private club industry on legislative and regulatory matters impacting the club world. He can be reached at [email protected].
Do Not Miss the Next HFTP Hangout for Club Professionals
Tuesday, April 14 | 2:00 p.m. CST
The next HFTP Hangout focused on clubs will address “Managing the Ever-Changing Landscape During COVID-19.” Led by Jim Hankowski, CPA of Condon O’Meara McGinty & Donnelly LLP, this interactive discussion will present best practices on how to deal with the new challenges and effects o f COVID-19 impacting clubs, as well as collaborate on some new ideas.
Briana Gilmore is the HFTP Communications Coordinator. Briana can be reached at [email protected] or +1 (512) 220-4017.