When it comes to the Employee Retention Credit (ERC) under the CARES Act, Congress has defined a “full-time employee” as someone who works 30 hours a week or 130 hours a month. This is in accordance with the Affordable Care Act (ACA). When applying for a PPP loan, lenders will look at the number of full-time employees and how the money was spent on employee salaries during the covered period to determine loan forgiveness. To calculate the number of full-time employees, you must add up your full-time (40 hours per week) and part-time employees (to get the total number of full-time equivalent employees).
Then divide that number to determine how many full-time employees your part-time employees represent and add them to the total number of full-time employees. When determining the average full-time wages and average annual full-time wage, all employees of the eligible small employer are considered, including those who ended their employment during the fiscal year, those covered by a collective bargaining agreement, and those who are not enrolled in health care coverage. To calculate this, add up the total wage paid by the employer during the tax year to its employees and divide that number by the number of full-time workers for the year. If an employer is considered to be a large employer, only salaries paid to any employee for the time they are not providing services during which the company was suspended or during a quarter in which there was a significant decline in gross revenues can be evaluated for ERC purposes.
For example, an employer with 48 part-time employees would have 24 full-time employees and may be eligible for the credit. If ABC Company were considered a small employer, it would be allowed to include any salary paid to any employee during a quarter in which there was a significant decline in gross income, regardless of whether they provided services or not.