Why is Seasonal Important

• April 3, 2020
• Paul Neiffer

One of the provisions of the Paycheck Protection Program deals with Seasonal Employers.  If you are considered a seasonal employer you likely will have a reduction in the loan amount that you will qualify for.  We did a post a couple days ago on how some of the provisions.

But what is a seasonal employer.  As of yet, we don’t know for sure.  We would surmise that it will be based on how each quarter’s total payroll expenses vary.  For example, if your quarterly payroll remains constant or if you are growing in size you likely are not a seasonal employer.

However, let’s assume you grow vegetables in the Missouri and incur very little payroll in the first quarter, have more in the second quarter to plant crops and then have a large amount in the third quarter to harvest and process crops and then finally have little or no labor in the fourth quarter you will likely be considered a seasonal employer.

Now this can either be bad or good for your calculated loan amount.  If your labor in the second quarter is much higher than labor in any of the other three quarters you will qualify for a larger loan since the loan will be based on the average monthly payroll costs during the second quarter and not based on annual amounts.

However, if your second quarter costs are much lower, the PPP rules require you to determine your average payroll during one of two periods in 2019.  You can either use the average for the 12 weeks beginning February 15, 2019 or you can use the average for March 1, to June 30, 2020.  That determines the amount you can receive.

Let’s look at a couple of examples:

Mary grows vegetables and incurs total annual payroll costs of $1 million.  Normally she would qualify for a loan of $208,333 based on average monthly payroll costs of $83,333.  Now, let’s assume that she is considered a seasonal employer and her total average payroll during the period listed above is only $20,000.  Then her loan amount drops to $50,000.  Conversely, if her average payroll costs during this period are $125,000 she would qualify for a loan of $312,500.

For Ag in general, I would consider this to be a loan limiting factor since there usually is substantially more labor costs incurred after the second quarter for permanent crops and other more labor intensive costs.  This likely does not matter for most row crop operations with more steady labor costs or minimal part-time labor.

As of yet we have no guidance on what is a seasonal employer and we hope to see it soon.

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