- Tax Alerts
Families First Coronavirus Response ActMarch 23, 2020 Alerts
The Families First Coronavirus Response Act (FFCRA) includes mandatory employer provided emergency sick pay and emergency paid family leave, as well as other provisions such as free COVID-19 testing.
Legislation at a Glance
- The Families First Coronavirus Response Act (FFCRA) includes mandatory employer-provided emergency sick pay and emergency paid family leave, as well as other provisions not related to the employment relationship such as free COVID-19 testing.
- A credit will be provided to employers to reimburse 100% of the qualified sick and leave wages as a credit against Employer Social Security Tax.
- The President signed the Act on March 19th, and the Act will be effective within 15 days, on a date determined by the Secretary of Treasury, and does not currently contain any retroactive applicability.
- The emergency sick pay and family leave requirements expire on 12/31/2020.
- As of yet, the effective date is unknown, but will be April 2nd at the latest.
- Congress is developing additional measures this week, which may include payments sent directly to taxpayers and bailouts for heavily impacted industries.
Some Bill Sections Applicable to Employers
Emergency Paid Sick Leave
This section requires employers with fewer than 500 employees to provide employees two weeks of paid sick leave, paid at the employee’s regular rate for their own sickness or care; or paid at two-thirds the employee’s regular rate to care for a family member or to care for a child whose school or place of care has closed due to the coronavirus. All employees, regardless of their tenure with the company, are entitled to this time.
Full-time employees are entitled to 2 weeks (80 hours) and part-time employees are entitled to the typical number of hours that they work in a typical two-week period. If the employee is using this time for their own illness, the benefit is limited to $511 per day, and $5,110 annually. If the employee is using this time to care for a family member, the benefit is limited to $200 per day, and $2,000 annually.
Emergency Paid Family Leave Provisions
Employers with fewer than 500 employees must provide employees who’ve been with the organization for 30 days or more the right take up to 12 weeks of job-protected leave under the Family and Medical Leave Act. The first two weeks may be unpaid or paid with Emergency Paid Sick Leave as detailed above, and the remaining 10 weeks are paid through Emergency FMLA, at a rate of two-thirds the employee’s regular rate of pay. This time may only be used if an employee can’t work, or telework, because they need to care for a child whose school or place of care is closed due to COVID-19. This benefit is limited to $200 per day, which a cap of $10,000 dollars total.
Tax Credits for Paid Sick and Paid Family and Medical Leave
Employers are entitled to a refundable tax credit equal to 100 percent of qualified paid sick leave wages paid by an employer for each calendar quarter, applied against the employer’s portion of social security taxes. This credit only applies to Emergency Paid Sick Leave wages. The credit amount varies depending on whether the sick leave is taken for the employee’s own illness, or to care for a family member:
- For the employee’s own illness, the amount of qualified sick leave wages taken into account for each employee is capped at $511 per day and $5,110 annually.
- For amounts paid to employees caring for a family member, the amount of qualified sick leave wages taken into account for each employee is capped at $200 per day, and $2,000 annually.
- For both the emergency paid sick and paid family leave, the credit shall be increased by the employer’s share of medical premiums associated with leave payments.
Further, employers are entitled to a refundable tax credit equal to 100 percent of qualified family leave wages paid by an employer for each calendar quarter, applied against the employer portion of Social Security taxes. Qualified family leave wages are wages required to be paid by the Emergency Family and Medical Leave Expansion Act. The amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters.
For both the paid sick leave and paid family leave credits, if the credit exceeds the employer’s total liability of Social Security Tax, the excess credit is refundable to the employer, most likely as a line item on form 941. The section applies only to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury and ending on December 31, 2020. Employers may elect not to apply the credit.
Possible Exemptions for Small Businesses
The bill grants the Secretary of Labor the authority to exempt businesses with fewer than 50 employees if the application of the requirements may jeopardize the business.
Paylocity is monitoring this and all related legislation closely and will continue to provide updates as new laws pass. We are working closely with our partners throughout the industry to ensure we will be able to support these requirements for our clients.