If your company has less than 50 employees, you are covered. Within the law, there was some language that the Secretary of Labor can issue an exempt to small businesses with fewer than 50 employees where it would jeopardize the viability of the business as a going concern but that may only be for the leave to care for a child whose school has closed. We are still waiting for further guidance on the details.
Summary of the Law:
To summarize this new law, it is a very short, quickly written law, that was signed by the President on March 18th and will take effect on Tuesday, April 2nd. Most of the questions about how to execute or implement it will be filled in over the next day’s/weeks/months. We are sharing everything we know below and will not be able to answer follow up questions about it until agency guidance has been released, which will take some time. We will update the website if and when things change and encourage you to check there.
Key Information for employers:
- FMLA expansion
- Paid sick leave
- Payroll tax credit: employers will get all the money they pay toward this back as a Social Security tax credit (taken off the top) quarterly. However, if they pay out more than they own in SS taxes, they will not get a refund.
Emergency FMLA expansion:
- Has different definitions than the rest of FMLA for covered employer (under 500 employees) and employee (employed at least 30 calendar days)
- Adds an entitlement to the leave section to care for a child under 18 if their school or place of care is closed for public health emergencies.
- The employer can exclude employees who are health care providers or emergency responders.
- Adds pay provision
- No pay for the first 10 days of leave
- After 10 days, pay of 2/3 regular rate of pay for the number of hours they would normally be scheduled to work
- Restoration to a position does not apply to employers with fewer than 25 employees IF certain conditions are met:
- Job no longer exists because of changes affecting employment caused by public health emergency AND
- Reasonable efforts to find equivalent positions were made (and failed) and employees are contacted if anything comes up within a year of when they would have come back,
- There may be exceptions made for businesses with fewer than 50 who would essentially go under if they provided leave,
Emergency Paid Sick Leave Coverage:
- Employers – All private employers with fewer than 500 employees
- Employee – All employees, no matter how long employed
- The employer can exclude employees who are health care providers or emergency responders.
- When an employee is subject to federal, state, or local quarantine or isolation order
- When advised by a health care provider to self-quarantine due to concerns related to COVID-19
- When experiencing symptoms of COVID-19 and seeking a medical diagnosis
- When caring for an individual doing #1 or #2
- When caring for a kid whose school or place of care is closed
- When an employee is experiencing any other substantially similar condition specified by the Secretary of HHS in consultation with the Secretary of the Treasury and the Secretary of Labor
- Full-time employees = 80 hours (regular rate for self-use, 2/3 rate for family member use)
- Part-time employees = number of hours worked on average over a 2–week period (regular rate for self-use, 2/3 rate for family member use)
- Caps: $511 per day/$5,110 total for uses 1, 2, and 3. $200 per day/$2000 total for uses 4, 5, and 6
- Newest version says the Secretary of Labor can issue regulations to exempt small businesses with fewer than 50 employees where it would jeopardize the viability of the business as a going concern and can exclude health care providers and emergency responders.
Notice requirement – Poster must be posted (a model notice will be provided by the government)
How Small Businesses Would Fund Benefits:
This is all the information we currently have. We will update the HR Support Center as soon as new information is available. ALL OF THE TEXT BELOW IS DIRECTLY FROM THE IRS.
Last Friday afternoon the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.
To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
- Paid Sick Leave for Workers
- For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid childcare leave when employees’ children’s schools are closed, or childcare providers are unavailable.
- Complete Coverage
- Employers receive 100% reimbursement for paid leave pursuant to the Act.
- Health insurance costs are also included in the credit.
- Employers face no payroll tax liability.
- Self-employed individuals receive an equivalent credit.
- Fast Funds
- Reimbursement will be quick and easy to obtain.
- An immediate dollar-for-dollar tax offset against payroll taxes will be provided
- Where a refund is owed, the IRS will send the refund as quickly as possible.
- Small Business Protection
Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or childcare is unavailable in cases where the viability of the business is threatened.
- Easing Compliance
Requirements are subject to a 30-day non-enforcement period for good faith compliance efforts.
Prompt Payment for the Cost of Providing Leave:
When employers pay their employees, they are required to withhold from their employees’ paychecks federal income taxes and the employees’ share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
- Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
- The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
- If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Equivalent childcare leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Small Business Exemption:
Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or childcare unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer’s business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.
Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.
Background on the Leaves and Pay That Must be Provided:
The Act provided paid sick leave and expanded family and medical leave for COVID-19 related reasons and created the refundable paid sick leave credit and the paid childcare leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.
The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee’s pay.
Paid Sick Leave Credit:
For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee’s regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.
For an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee’s regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Childcare Leave Credit:
In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive refundable childcare leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the childcare leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
If you have additional questions, don’t hesitate to give us a call at (713) 999–1205 or schedule a FREE 15-minute consultation using the link: https://www.smarterhrsolutions.com/schedule-consultation/
For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted next week.
Information courtesy of our Payroll Partner