Colorado Paid Family and Medical Leave

At a Glance 

• Colorado voters approved Proposition 118 that now requires employers to provide Paid Family and Medical Leave to their employees
• Contributions begin on January 1, 2023.
• Benefits for employees begin on January 1, 2024.
• Contributions will be funded 50/50 by the employer and the employee

Introduction 

On November 3^rd, 2020, Colorado voters passed Proposition 118, mandating Paid Family and Medical Leave (PFML) for all employers in the state. This initiative requires employers provide 12 weeks of leave for Colorado employees, plus an additional four weeks in case of medical complications. Contributions will begin on January 1, 2023 with benefits being available to employees on January 1, 2024.

With the passing of this law, Colorado Department of Labor much create a Division of Family and Medical Leave Insurance.  The Division will be responsible for creating the fund and providing notice to the regulated community regarding payment of tax and filing for the claims prior to January 1, 2023.

Eligibility

Businesses with fewer than 10 employees would be exempt from the employer premium, and companies could apply to use a private leave program instead of participating in the statewide program if it meets set criteria approved by the Division of Family and Medical Leave Insurance within the State Department of Labor.

Employees will be eligible for PFML leave and benefits if they have earned at least $2,500 at their job and have been employed by the employer for at least 180 days. However, benefits will not be payable until the employee accumulates at least eight hours of PFML insurance benefits. 

Contributions

Beginning January 1, 2023, each employer must remit a payroll tax to the fund to provide for the benefits with the tax being paid 50/50 by the employer and employee. From January 1, 2023 to December 31, 2024, the total combined payroll tax amount is 0.9%. 

After January 1, 2025, the Director of the fund will set the premium amount based on a percentage of employee wages and at a rate to fund 135% of the benefits paid during the prior calendar year.

Benefits

The amount of leave benefits is determined based on a comparison of the employee’s average weekly wage and the state average weekly wage. The portion of an employee’s average weekly wage that is equal to or less than 50% of the state average weekly wage is replaced at a rate of 90%; and the portion of the employee’s average weekly wage that is more than 50% of the state average weekly wage is replaced at a rate of 50%. The maximum weekly benefit is 90% of the state’s average weekly wage, except any leave taken in 2024 has a maximum weekly benefit of $1100. 

Employees may use their PFML benefits for the following reasons:

• care for their own serious health condition;
• care for a new child during the first year after the birth or adoption or for foster care of a new child;
• care for a family member with a serious health condition;
• when a family member is on active duty military service or is called for active-duty military service; and
• when the individual or the individual’s family member is a victim of domestic violence, stalking, or sexual assault.

Next Steps 

Paylocity will continue to monitor this new legislation for any additional changes and will provide updates as the effective date approaches.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. 

This information is provided as a courtesy, it may change and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney or Advisor.