The Families First Coronavirus Response Act passed to help employees and families plus provide employer tax credits for the COVID-19 pandemic. The law includes provisions you have likely been following closely. President Trump has signed the bill and it goes into effect within 15 days and expires on December 31, 2020.
While employers will have to front the costs, they will be fully reimbursed by the federal government within three months through refundable tax credits that count against employers’ payroll tax. We are monitoring developments to keep you informed and you are welcome to schedule time with us if you need assistance. Below, we’ve broken down what you need to know to prepare your business:
1. Employer Tax Credits
What tax credits will the Employer get? Employers who provide the emergency leave will be eligible to receive a 100% payroll tax credit for these costs. Below are the details on credits:
- The sick leave credit for each employee will be for wages (including qualified health plan expenses relating to those wages) of up to $511 per day while the employee is receiving paid sick leave to care for themself, or $200 if caring for a family member or child whose school has closed. The credit will be limited to 10 days per employee, per quarter.
- The family leave credit for each employee will be for wages (including qualified health plan expenses relating to those wages) of as much as $200 per employee per day, and $10,000 in the aggregate for all calendar quarters.
Will wages be subject to the Social Security Payroll Tax? Refundable credits for the employer portion (but not the employee portion) of the Social Security component of payroll taxes (i.e., the 6.2% employer portion of the Social Security tax) will be provided to employers to cover wages paid to employees for time off under the above sick leave and family leave programs.
What if I’m self-employed? The credits will be applied against the self-employment tax.
- To prevent a double benefit (using both credits), employers must include the amount of credits received in their gross income.
- Any wages considered in determining the credit allowed under the above emergency provisions will reduce the Code section 45S paid family and medical leave credit established by the 2017 tax reform act available to the employer.
- An employer can elect to not take the credit for a given quarter.
- Amounts will be transferred to the social security and disability insurance trust funds from the general fund to cover the cost of the credits and lost wages.
2. Emergency Sick Leave
What does the sick leave entail? 80 hours of paid sick leave to be provided for full-time employees for a qualifying need. Part-time employees are granted leave equivalent to their average number of hours worked in a two-week period. Workers taking time off to care for family members must be paid at two-thirds of the foregoing rate. This sick leave is available for immediate use regardless of the employee’s tenure with the employer.
Who is a Qualifying Employer? Employers with fewer than 500 employees. The Department of Labor is expected to provide regulations on:
- Companies with fewer than 50 employees are eligible for a waiver if the paid sick leave would jeopardize business viability.
- Employers of employees who are health care providers or emergency responders.
Who are Eligible Employees? Private-sector employers will have to provide employees who cannot work or telework with paid sick time off if the employee is:
- subject to a coronavirus quarantine or isolation order;
- who has been advised by a health care provider to self-quarantine due to coronavirus concerns;
- experiencing symptoms of coronavirus and is seeking a medical diagnosis;
- caring for an individual described in (i) or (ii) above;
- caring for a child whose school or place of care is closed, or the childcare provider of the child is unavailable, due to coronavirus precautions; or
- experiencing any other substantially similar condition specified by HHS in consultation with the Treasury and Labor Departments.
The above qualifying needs only apply where the employee cannot otherwise perform their job while complying with the physician’s directive or caring for a family member or child.
How much do Employers pay? Employers are required to pay employees their normal wages or the minimum wage at the federal/state/local level, whichever is the higher. Sick-leave pay is capped at $511 per day ($5,110 in total) per employee for the employee’s own health-related absence and $200 per day ($2,000 in total) for caring for a family member or child whose school has closed. Wages required to be paid under the emergency sick leave provisions will not be subject to the 6.2 percent social security payroll tax typically paid by employers on employees’ wages.
Will Employers need to inform employees? Employers will have to post a notice containing information regarding the emergency sick leave provisions; the Labor Department is to create a model notice within 7 days.
How does this impact current PTO and other HR policies? Emergency Sick Leave must be provided in addition to any sick leave already provided by the employer. An employer cannot require a worker to use any other available paid leave before using sick time. Employers are prohibited from (i) requiring workers to find replacements to cover their hours during time off; or (ii) discharging or discriminating against workers for requesting paid sick leave or filing a complaint against the employer related to such.
3. Emergency Family and Medical Leave
This part of the law expands the Family and Medical Leave Act (FMLA) for employees who need to take longer-term leave through the end of the year because of closed schools or daycare. It does not extend benefits for those not working because of site closures or other reasons not already covered by FMLA.
Who is a Qualifying Employer? Any employer, even those with fewer than the current FMLA threshold of 50 employees. The Department of Labor can exempt employers with fewer than 50 employees if complying with the law would threaten the viability of the business. It is unclear how this exemption would be granted or how lenient this will be.
Who are Eligible Employees? Employees must be employed by the employer for at least 30 days and who are unable to work or telework because they have a minor child whose school or daycare is closed, or if the childcare provider of that child is unavailable due to a coronavirus emergency. Certain healthcare workers and emergency responders may be excluded from coverage.
How much do we pay? The first 10 days do not need to be paid. The employee chooses whether to use other paid leave or take unpaid leave. The following 12 weeks must be paid at least 2/3 of the employee’s normal pay rate. Family-leave pay is capped at $200 per day, $10,000 in total. Wages required to be paid under the emergency family leave provisions will not be subject to the 6.2 percent social security payroll tax typically paid by employers on employees’ wages.
What happens when the employee’s leave is over? Generally, the employee on leave must be restored to his or her prior position. This requirement does not apply to employers with less than 25 employees if the position held by the employee on leave no longer exists due to economic conditions or other changes in the employer’s operating conditions caused by the coronavirus pandemic, and the employer makes reasonable efforts to restore the employee to an equivalent position.
4. What Employers Need to Do Now
Examine your current policies to determine what type of policy updates you should consider and how you will communicate these changes to your workforce. Short-term amendments to your FMLA and paid-time-off policies need to be considered.
Employers should also be examining the potential financial impact of the law and whether any anticipated workforce changes could be problematic.
The law mandates the Department of Labor produce a notice posting and additional guidelines within seven days. The Department of Treasury is to issue regulations or guidance relating to the employer tax credits. We will continue to monitor developments and share information as it becomes available.
If you need assistance, schedule a meeting with us!