by Lauzen Accounting and Lauzen Payroll
Last night, the President signed The Families First Coronavirus Response Act (FFCRA) into law. While the accounting profession is still learning the details and how this will impact businesses, we wanted to provide an update.
The FFCRA provides a) paid leave benefits to employees; b) tax credits for employers and self-employed taxpayers; and c) FICA tax relief for employers.
Emergency Paid Sick Leave
The Emergency Paid Sick Leave Act requires certain employers to provide two weeks of paid sick leave to employees who are unable to work or telework under certain circumstances. Paid sick leave is available when an employee:
1.is subject to a federal, state, or local quarantine or isolation;
2.is advised by a health care provider to self-quarantine;
3.is experiencing symptoms of COVID-19 and is seeking a medical diagnosis, preventive care, or treatment;
4.is caring for a family member under quarantine or isolation;
5.is caring for a child due to a school or childcare provider closing; or
6.is experiencing a substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
Eligible full-time employees will be may receive up to 80 hours (two weeks) of paid emergency sick leave equal to 100% of regular pay (up to $511 per day) when the employee is subject to a quarantine or isolation, is experiencing symptoms of COVID-19 or is seeking a diagnosis and/or treatment. Part-time employees are entitled to paid sick leave for the typical number of hours worked in a two-week period (up to $511 per day).
For employees who are caring for a family member or a child during a school or childcare provider closing or experiencing a substantially similar condition, eligible full-time employees may receive up to 80 hours (two weeks) of paid time off (up to $200 per day). Eligible part-time employees are entitled to paid leave for the typical number of hours worked in a two-week period (up to $200 per day).
Payroll Tax Credits for Paid Sick Leave
Employers may take a payroll tax credit against Social Security (6.2%) and Medicare (1.45%) for paid sick leave of up to $511 per day or $200 per day, whichever is applicable as described in the above circumstances for a total of 10 days per individual per calendar quarter.
Emergency Paid Family Leave
The Emergency Family and Medical Leave Expansion Act requires certain employers to provide paid family leave to employees who are unable to work or telework under certain circumstances. Paid family leave is available for eligible employees to take care of a child in the event of a school closure or if a childcare provider is unavailable due to COVID-19.
Eligible employees may take up to 12 weeks of job-protected leave. The first two weeks of leave may be unpaid and is followed by 10 weeks of paid leave. Employees may use other available paid leave during the two weeks of unpaid leave. Employees will receive no less than 2/3 of the employee's usual pay. Paid family leave may not exceed $200 per day and $10,000 in total.
Payroll tax credits for paid family leave
Employers may take a payroll tax credit against Social Security (6.2%) and Medicare (1.45%) for paid family leave of up to 100% of qualified family leave wages paid in each quarter. The maximum amount of the credit for each employee is $200 per day up to $10,000 in total.
Provisions applicable to both Paid Sick Leave and Paid Family Leave
The FFCRA generally applies to employers with 500 or fewer employees. However, the legislation also gives the Secretary of Labor the authority to exempt small businesses with fewer than 50 employees from some paid leave requirements if those requirements would jeopardize the viability of the business.
Paid sick leave and paid family leave will not be considered wages for the employer or the employee for the purposes of FICA (Social Security and Medicare).
While employers will front the cost of paid sick leave and paid family leave, the federal government will fully reimburse the employer within three months. The reimbursement will cover wages and the employer's contribution to the employee's health insurance premiums ("qualified health plan expenses") during the period of leave to the extent that such amounts are appropriately excluded from the gross income of employees. The reimbursement will be through a refundable tax credit against the employers' payroll tax. A refund will be made if the costs are greater than the employer's tax liability.
More to Come
Senate Majority Leader, Mitch McConnell (R-KY) stated on the Senate floor that while he supports the House bill to provide "some emergency relief for some American workers," the Senate will work towards a package to provide "significant relief for small businesses." McConnell stated that the Senate will remain in session until an economic relief package is passed for America's small business owners.
Unemployment Policies During COVID-19 Pandemic
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