President Trump signed the Families First Coronavirus Response Act, the first national legislation to offer Americans relief from the coronavirus’ impact on the economy, on March 18th. Its provisions will go into effect within 15 days of passage. While this situation continues to evolve and we expect more to come, there are some key provisions for which business owners should be making adjustments now. There are a variety of stipulations that will impact your payroll, and we aren’t going to cover all of the details here. If you require assistance understanding how your business is impacted, please contact us to schedule a consultation.
1. Emergency paid sick leave
Workers who are ill, quarantined, or isolated due to COVID-19 will receive 80 hours of paid leave, with part-time employees receiving pay for the average number of hours they work in two weeks. The emergency paid sick leave under this act will not count toward the employee’s existing available paid leave, nor can the employer require the employee to use their accrued PTO prior to tapping the emergency leave.
Tax credits are designed to cover the cost for businesses to pay sick employees, with up to $511 per day (capped at $5,110 per employee) allowed in quarterly payroll tax credits. Employees who take emergency leave to care for an affected family member are capped at $200 per day (not to exceed $2,000 in aggregate). The paid leave will not be subject to the typical 6.2% social security tax.
2. Family Medical Leave Act expansion through December 31
Employers with fewer than 500 employees will be eligible to receive tax credits covering 100% of the cost of paid sick leave for employees who are unable to work or telecommute because they are caring for a quarantined family member or a child whose school is closed due to the pandemic. Pursuant to traditional FMLA regulations, the employee must be returned to a comparable position following the conclusion of the leave (with exceptions for employers of under 25 people whose business would be jeopardized by holding the role open). The employer may not discriminate against any employee who uses leave.
The employee may receive two weeks of full pay, followed by three months paid at no less than two-thirds of the regular pay. Tax credits covering the employee’s leave will not exceed $200 per day and are capped at $10,000 per employee These credits will be applied to quarterly payroll taxes, with any excess going toward business tax credits.
Self-employed individuals can also take paid leave in the form of credits toward their annual business taxes.
More about the Coronavirus Response Act
The Department of Labor has created a model notice explaining these emergency measures for employees that businesses must post in a conspicuous place. Smaller businesses with fewer than 50 employees may be exempt from certain requirements if they would place an outsized burden on the business’ ability to remain in operation. Healthcare organizations may also be exempt.
The Coronavirus Response Act includes a variety of other provisions related to food assistance and unemployment, none of which will affect the way you run payroll at this time. States may also pass their own relief, and it’s unclear how Congress will handle businesses employing more than 500 people. We will do our best to keep you up to date as the situation continues to progress.
Additional changes are in the Congressional pipeline and sure to pass quickly. If you are managing payroll yourself, we recommend keeping your system up to date daily and following the changes to make sure you don’t make any costly errors or lose out on tax credits. Now may be the ideal time to take this burden off of yourself and turn the payroll function over to a trusted partner. Many payroll services also offer an outsourced HR option. We provide payroll services that will fit some situations, and we work with other payroll providers to connect our clients with the best option for them. Contact us now to learn more.
