Sick Pay, Medical Leave, and Payroll Tax Credits Provided by the Families First Coronavirus Response Act
By Susan Waterloo, CPA, Partner and Gina Brymer, CPA, Senior Manager
March 20, 2020
President Trump signed into law H.R. 6201 the Families First Coronavirus Response Act (“the Act”) on March 18, 2020. The Act provides emergency paid sick leave, expands the Family and Medical Leave Act, and provides payroll tax credits to certain employers.
Emergency Sick Leave
The new law requires employers with less than 500 employees to provide paid leave to employees dealing with the impact of COVID-19 in the following situations:
- The employee is subject to or advised to self-quarantine, or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis
- The employee is caring for an individual subject to quarantine or is caring for their child if school/daycare is closed, or the employee is experiencing a similar condition to be specified by Health and Human Services
For full-time employees, eighty hours of paid sick leave is provided. For part-time employees, an average or estimate is used to determine the number of hours of paid leave.
Employers are required to pay employees their normal wages or the minimum wage, whichever is higher. The two categories detailed above control the amount of pay to be received by the employee. Paid sick leave is capped at $511 a day (total of $5,110 per employee) for employees dealing with their own COVID-19 issues and $200 per day ($2,000 in total) if caring for a family member or child.
Employers providing the paid sick leave will receive a refundable credit against employment taxes, specifically either the OASDI or the RRTA portion (as applicable) of the payroll tax. The payroll credit, claimed on a quarterly basis, is equal to 100% of the amount of sick leave wages subject to the limits detailed above.
Emergency Family and Medical Leave Expansion
Employers with less than 500 employees must allow an eligible employee (one who has been on the payroll for at least 30 days) to take up to 12 weeks of job-protected leave to care for their child if the school/day care is closed due to the Coronavirus.
The first 10 days of the leave can be unpaid, and the employee may elect to use accrued vacation, personal, or sick days for this time period. The remaining ten weeks must be paid at two-thirds of the regular rate of pay, capped at $200/day and $10,000 per employee.
The new law also provides a corresponding payroll tax credit for emergency family leave up to $200 per day or a total of $10,000 per employee.
Exceptions and Effective Date
The Act granted the Secretary of Labor the authority to exempt employers with fewer than 50 employees from the paid family leave requirement if this would jeopardize the business viability of the employers. No guidance is available to determine how this exemption would be granted.
The law goes into effect no later than April 2, 2020 and sunsets effective December 31, 2020.
If you have any questions, please contact your MichaelSilver tax professionals at 847.982.0333.