Advance Payment of Tax Credits for Paid Leave

Congress now requires most employers to provide temporary paid sick, family, and medical leave for employees who are directly affected by the COVID-19 outbreak. However, eligible employers who provide qualifying sick or family and medical leave will be able to keep an amount of the payroll taxes they would normally pay equal to the amount of wages, employer’s share of Medicare tax, and health insurance benefits provided to employees taking qualifying sick and family and medical leave.

The paid sick, family, and medical leave helps ensure that workers are able to stay home from work when sick and are able to take care of their loved ones. These emergency categories of leave go into effect on April 1, 2020 and all leave required under this law expires on December 31, 2020.

Are my employees eligible for these paid leave programs?

If you are an employer with less than 500 employees, then your employees may be eligible for both paid sick leave and paid family leave under the Families First Coronavirus Response Act.

Only employees who have been employed for at least 30 calendar days are eligible for paid family leave.

Can my business be exempted from the law’s requirements?

If your business has fewer than 50 employees, you may apply to the United States Department of Labor’s (DOL) Wage and Hour Division (WHD) for an exemption from only the emergency paid family and medical leave requirement if meeting the requirement would put the life of your business in jeopardy.

For more information about an exemption, please contact the WHD at 1-866-4US-WAGE.

My business will have to provide leave to employees. What are my employees entitled to?

Emergency Paid Sick Leave

Use: Employees may use sick leave because,

  1. They are subject to a federal, state, or local quarantine, or isolation order related to COVID-19.

  2. They have been advised by a health care provider to self-quarantine due to concerns related to COVID-19.

  3. They are experiencing symptoms of COVID-19 and seeking a medical diagnosis.

  4. They are caring for an individual who is subject to an order as described in paragraph (1) or has been advised as described in paragraph (2).

  5. They are caring for a son or daughter because the school or place of care of the son or daughter has been closed, or the childcare provider of such son or daughter is unavailable due to COVID-19 precautions.

  6. They are experiencing any other substantially similar condition specified by the secretary of Health and Human Services.

Pay:

  • Full-time employees will receive their full regular rate of pay, capped at a total of $511 per day, for leave taken pursuant to reasons (1), (2), and (3) above.

  • Full-time employees will receive two-thirds their full regular rate of pay, capped at a total of $200 per day, for leave taken pursuant to reasons (4), (5), and (6) above.

  • For part-time employees or those with irregular hours, leave pay will be calculated based on the number of hours the employee works on average over a 2-week period in the past year.

Duration:

  • If eligible for paid sick leave, full time employees will be granted 80 hours (10 days) of paid sick leave.

  • Part-time employees will be granted a pro-rated amount based on their average number of hours.

Emergency Paid Family and Medical Leave

Use: Employees may use family and medical leave to

  • Care for a child under 18 years of age whose school or childcare provider has been closed due to reasons related to COVID-19.

Pay:

  • The first 10 days of this leave is unpaid, although employees may use paid time off or sick time to cover some, or all, of the initial unpaid period.

  •  After the initial 10 days, full time employees will receive two-thirds of their regular rate of pay, capped at a total of $200 a day.

Duration:

  • If eligible for paid family and medical leave, full-time employees may take such leave for up to 12 weeks total.

  • Part-time employees or those with irregular schedules will be paid at 2/3 of their regular rate for the average number of hours worked over the prior 6 months of employment.

I already provide my employees with paid sick leave, can I change my policy because of these requirements?

No, please be aware that this emergency paid sick leave does not diminish your employees’ existing rights to paid leave under a collective bargaining agreement or existing employer policy.

When does this take effect and will I get in trouble if I don’t provide leave immediately?

The law takes effect on April 1, 2020. However, DOL will not bring an enforcement action against any employer for violations in the first 30 days so long as the employer has acted reasonably and in good faith to comply.

Will I receive any help in paying for this leave?

Yes, the Families First Coronavirus Response Act provides for a refundable tax credit to offset the costs of any paid leave wages that you must pay because of these requirements.

How will these tax credits work, and does this help me immediately?

Eligible employers who provide pay qualifying sick or family and medical leave will be able to keep an amount of the payroll taxes they would normally pay equal to the amount of wages, employer’s share of Medicare tax, and health insurance benefits provided to employees taking qualifying sick and family and medical leave.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

If there are not sufficient payroll taxes to cover the cost of qualified sick and family and medical leave paid, employers will be able file a request for an accelerated payment from the IRS for the difference. The IRS expects to process these requests in two weeks or less.

Can I claim a tax credit for paid sick leave I already provide to my employees?

No, only leave required under Families First, and granted starting April 1, 2020, is eligible for a tax credit.

More Information

For more information on implementing emergency paid leave, please visit www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave, or call the Department of Labor’s Wage and Hour Division at 1-866-4US-WAGE.

For more information on employer tax credits related to emergency paid leave, please visit www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus.

If you have additional questions, my staff will help get you answer. Contact my nearest office here.