Who is required to provide employees with paid sick leave under the Families First Coronavirus Response Act (FFCRA)?
The FFCRA requires private employers with fewer than 500 employees to provide employees with paid sick leave or expanded family and medical leave for reasons related to COVID-19. This requirement is also mandatory for certain public employers. The provisions are effective from April 1st, 2020 through December 31st, 2020.
If a small business has fewer than 50 employees and its viability would be jeopardized by providing paid leave due to school closings or childcare unavailability, the business may qualify for an exemption to this paid leave requirement.
What reasons qualify an employee for paid sick leave?
An employee is qualified to take paid sick leave under the FFCRA if they are unable to work due to any of the following reasons in relation to COVID-19:
The employee is subject to a Federal, State, or local quarantine or isolation order.
The employee has been advised by a health care provider to self-quarantine.
The employee is experiencing COVID-19 symptoms and is seeking a medical diagnosis.
The employee is caring for an individual who is in quarantine at the advice of a healthcare provider or in accordance with a Federal, State, or local quarantine or isolation order.
The employee is caring for a child whose school is closed or whose childcare provider is unavailable due to circumstances relating to COVID-19.
The employee must take leave due to “substantially similar conditions” as determined by the U.S. Secretary of Health and Human Services.
How much paid leave are employees entitled to under the FFCRA?
Specific paid leave requirements depend on an employee’s length of employment and their reason for taking leave.
If any employee is unable to work because they are experiencing COVID-19 symptoms and seeking a medical diagnosis, or if they are quarantined at the advice of a health care provider or pursuant to federal, state, or local government order, the employee must receive two weeks (up to 80 hours) of paid sick leave at their regular rate of pay.
If any employee must take leave in order to care for either an individual subject to quarantine or a child whose school is closed or whose care provider is unavailable due to reasons relating to COVID-19, the employee must receive two weeks (up to 80 hours) of paid sick leave at two-thirds their regular rate of pay.
Employers must also provide up to an additional 10 weeks of paid expanded family and medical leave at two-thirds an employee’s regular rate of pay to any employee who has been employed for 30 days or more and must take leave in order to care for a child whose school is closed or whose child care provider is unavailable due to COVID-related reasons.
What assistance is available to help employers recoup the cost of providing COVID-related paid leave?
Deferral of Certain Payroll Taxes
Under the Coronavirus, Aid, Relief and Economic Security (CARES) Act, employers are permitted to defer the deposit and payment of the employer’s share of Social Security taxes (and certain railroad retirement taxes) without incurring penalties for failure to deposit or failure to pay.
This payroll tax deferral is applicable from March 27th, 2020 to December 31st, 2020.
Although all employers are eligible for the payroll tax deferral, employers who have received a Paycheck Protection Program (PPP) loan may not defer the deposit and payment of their share of Social Security tax that is otherwise due after they have received a decision from the lender that their PPP loan has been forgiven.
Employee Retention Credit
The Employee Retention Credit is available to most employers, including tax-exempt organizations, regardless of their size. Eligibility rules exclude state or local governments and their instrumentalities, as well as businesses that take out small business loans.
Upon meeting at least one of the following requirements, eligible employers may receive the Employee Retention Credit:
The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
The employer’s gross receipts are below 50% of the comparable quarter in 2019.
After an employer’s gross receipts rise above 80% for a comparable 2019 quarter, they will no longer qualify for the credit following that quarter.
The Employee Retention Credit is calculated as 50% of qualifying wages (up to $10,000) paid after March 12th, 2020 and before January 1st, 2021.
Qualifying wages are based on a business’s average number of employees during 2019:
For employers who had 100 employees or less during 2019, the credit is based on wages paid to all employees (regardless of whether or not they worked).
For businesses with more than 100 employees, the credit is only allowed for wages paid to employees who did not work during the calendar year.
Eligible employers can be immediately reimbursed for this credit by reducing their required deposits of payroll taxes withheld from employees’ wages. Employers can also request an advance of the credit by submitting Form 7200.
Paid Sick Leave Credit
Employers who must pay eligible employees for periods of sick leave during which they are unable to work or telework due to reasons related to COVID-19 may claim a fully refundable tax credit equal to 100% of the qualified sick leave wages paid.
This credit also includes the amount of the employer’s share of Medicare taxes imposed on the qualified sick leave wages, in addition to any qualified health plan expenses allocable to those wages.
Given the fluid nature of current events, we will be regularly updating our website with relevant information regarding COVID-19 relief efforts and their implications for our firm and our community. Learn more about how COVID-19 will impact your financial situation at our webpage dedicated to COVID-19 updates.
Please subscribe to our blog below to stay up-to-date with the latest information on COVID-19, tax tips, financial planning advice, and more.