The CARES Act Explained for Employers
The CARES Act gave employers three things worth knowing about: a payroll tax deferral, an employee retention credit, and easier access to retirement funds for staff. Most of its provisions were time-limited, but the structure still shapes how relief programs are written.
What it actually changed
The act had three employer-facing pieces. The payroll tax deferral let employers delay deposit of the employer share of Social Security tax, with repayment spread over later periods. The employee retention credit rewarded keeping people on payroll during quarters when revenue collapsed or operations were suspended. And retirement provisions let participants take penalty-free coronavirus-related distributions and loans from their plans.
| Provision | What it did |
|---|---|
| Payroll tax deferral | Delayed employer Social Security deposits; repaid over following years |
| Employee retention credit | Credit against payroll taxes for retaining staff through disruption |
| Retirement access | Penalty-free distributions and expanded loans for affected employees |
Why it still matters
Two reasons. First, the retention credit generated claims that are still being audited years later; if your payroll provider filed on your behalf, know where those filings live. Second, every relief framework since borrows the same architecture: credits claimed against employment tax, documentation required up front, deadlines that do not move.
The lessons for the next disruption
- Know who filed what. A PEO or payroll service files under its process, but the eligibility facts are yours.
- Keep the documentation with the return, not in email.
- Treat any credit claimed as an audit item from day one.
Next
Frequently asked
Did the CARES Act payroll tax deferral have to be repaid?
Yes. Deferred deposits were due in two installments after the deferral period ended. Employers that did not plan for repayment faced accelerated collection.
Could I claim the retention credit and a PPP loan?
Rules on stacking changed over time; initially the same wages could not count for both. Later guidance allowed retroactive claims in defined cases, which is why documentation matters.
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