In March, the Families First Coronavirus Response Act (FFCRA) was enacted which requires certain employers to provide employees with expanded medical leave and family leave for specified reasons related to COVID-19. As cases of coronavirus increase, employers should be aware that they could be required to offer sick and family leave to employees. Employers may also be eligible for payroll tax credits to offset the cost of this paid leave requirement. The Department of Labor has an FAQ page with additional details.
The following information relates only to the emergency paid sick leave requirements. If you have questions about the family medical leave pay portion of the Act, please contact one of your Mitchell Wiggins team members.
Which employers are subject to this requirement?
Private employers with fewer than 500 employees, and public employers of any size, must provide 80 hours of paid sick time to full-time employees who are unable to work (or telework) for specified virus-related reasons. This amount is immediately available regardless of the employee’s length of employment. The maximum amounts payable vary based on the reason for absence.
The Department of Labor requires that covered employers post a notice in “a conspicuous place on its premises . . . emailing or direct mailing this notice to employees, or posting this notice on an employee internal or external website.”
What are employers required to offer employees?
Eligible employers, as defined above, are required to offer paid leave to employees that, related to COVID-19, are subject to quarantine order, advised to quarantine or experiencing symptoms and seeking diagnosis. This leave must be offered to all employees, even those that are not included in the employer’s existing sick leave policy. The limit on the wages paid is $511.00 per day and $5,110.00 in total for two weeks up to 80 hours for full time employees.
The leave can also be used for an employee caring for an individual that is subject to quarantine order, advised to quarantine, or experiencing symptoms and seeking diagnosis or caring for a child whose school or child care provider is unavailable. The limit for employees with these circumstances is two-thirds of their regular pay up to $200 per day or $2,000 in total. The wages do not have to be consecutively over two weeks. For example, an employee that has a child remote learning one day per week could utilize this leave for that one day per week. There are certain exemptions for employers from providing leave related to child and family care. Contact your Mitchell Wiggins team member if you have employees that may request this leave.
Are part time employees eligible for this leave?
If the employee is part time their compensation is based on their average part time hours for a two week period. A part time employee for the definition of this limit is any employee who normally works less than 40 hours a week.
Are employees of medical businesses exempt from this provision?
Previously, Healthcare providers could exclude their employees from the FFCRA Pay. This was challenged and now healthcare providers can only exclude Patient Facing employees. Employees working in administration, billing departments, etc., that don’t regularly deal with patients cannot be excluded from the FFCRA Act provisions. The DOL has asked employers to “be judicious” when deciding to exempt employees from this leave program.
Are the wages subject to payroll and income taxes?
Emergency Paid Employee Sick Leave is taxable for the employee and employer medicare tax, federal and state withholding, as well as federal and state unemployment taxes. For social security taxes, only the employee portion should be calculated. There is no employer social security tax on these wages.
How does this affect my employees’ PTO or sick leave balance?
An employer may not reduce the employee’s sick time, or any other accumulated leave balances. The Emergency Paid Sick Leave is paid first. If an employee continues to be unable to work after the two weeks, they can then use their sick leave to continue compensation.
What credit is available for the employer for these wages paid?
The credit will consist of:
- Emergency Paid Sick Leave wages
- Health insurance premiums paid by the employer for the period
- Any employee pre-tax health insurance for the period
- Employer medicare tax paid on the wages
How does the employer receive the credit?
Employer’s will receive a credit on their quarterly form 941. The IRS has released the new 941 Worksheet 1 to calculate the credit. If an employer paid the tax deposits without taking into account these credits, the result would be an overpayment equal to the employer share of social security, if calculated, on the eligible wages, plus the credit amount. Employers can choose to apply to the next quarter or have it refunded.
How should an employer record the credits?
The credit should be reported as other miscellaneous income. The Social Security portion of the credit should reduce an employer’s social security expense.
May an employer use salaries for this credit and PPP Forgiveness?
If an employer receives a PPP Loan, they cannot use these hours/pay in the forgiveness calculations.
What internal documentation should an employer retain?
A best practice is to have the employee fill out a request form for this particular leave. This will serve as substantiation for compensation to the employee and the credit received. There is not a sample form provided by the DOL or IRS.
When do these provisions expire?
The sick leave mandate takes effect no later than 15 days after March 18, 2020 (the date of the Act’s enactment) and expires December 31, 2020. This could be extended by additional legislation.
How can Mitchell Wiggins help?
Contact a Mitchell Wiggins team member for assistance with maximizing benefits. Our payroll tax specialists can ensure your system is correctly capturing and recording leave related to the FFCRA, and ensure your quarterly payroll returns are maximizing the credits available to your business.