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Emergency Paid Leave Provisions Enacted

On March 18th, the President signed HR 6201 which covers a number of emergency provisions that impact employees and their employers.  See updated information 

provided by the IRS on 3/20. 

Executive Summary of Employer Provisions of the Families First Coronavirus Response Act

  1. Employers are required to provide up to 12 weeks of paid family medical leave and up to two weeks of paid sick leave for employees directly impacted by the Covid virus. 
  2. Employers who make these payments are entitled to take refundable credits (against certain payroll taxes) for the amount of the employee payments plus certain health care benefits they provide.  See updated information below on how these credits are to be applied and used by employers. 

Amounts required to be paid to employees are based on the type of leave required and for hourly employees, depend on their typical hours worked.

Details of the Act

The new law covers emergency family and medical leave (FMLA) benefits, emergency paid sick leave benefits, and employer and self-employed tax credits and exclusion from employer FICA tax with respect to the payment of those benefits. 

Employee Benefits

  1. Emergency paid family and medical leave

Provides employees of employers with fewer than 500 employees and government employers, who have been on the job for at least 30 days, with the right take up to 12 weeks of job-protected leave under the Family and Medical Leave Act to be used for any of the following reasons:

  1. To adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus;
  2. To care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus;
  3. To care for a child of an employee if the child’s school or place of care has been closed, or the child-care provider is unavailable, due to a coronavirus.

After two weeks of paid leave, employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay.

2. Emergency sick leave

This section requires employers with fewer than 500 employees and government employers to provide employees two weeks of paid sick leave.

Rates paid depend on the reason for the leave: 

  1. If the leave is for the employee "to quarantine or seek a diagnosis or preventive care for coronavirus"   the employee is to be paid at their full rate of pay. 
  2.  If the leave is "to care for a family member for such purposes or to care for a child whose school has closed, or child care provider is unavailable, due to the coronavirus"  the employee is to be paid at two-thirds of their regular rate.

Time allowed

  1. Full-time employees are entitled to 2 weeks (80 hours) and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.
  2. The bill ensures employees who work under a multi-employer collective agreement and whose employers pay into a multi-employer plan are provided with leave.

Employer Provisions

  1. Emergency paid family and medical leave

Employers required to pay for emergency family and medical leave under the provision above are eligible to take a refundable tax credit against certain payroll taxes.  The amount of the credit is determined by an employer for each calendar quarter. 

How applied 

The tax credit is allowed against the employer portion of Social Security taxes.  

Update 3/25: IRS News Release (IR-2020-57) dated 3/20 states: 

"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 child care 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."

Amount of Credit

The amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the employer’s total liability for employer social security taxes for all employees for any calendar quarter, the excess credit is refundable to the employer.

2. Emergency sick leave

Employers required to pay for emergency employee sick leave under the provision above are eligible to take a refundable tax credit against certain payroll taxes.  The amount of the allowed credit is determined by an employer for each calendar quarter. 

How applied 

The tax credit is allowed against the employer portion of Social Security taxes and includes all wages required to be paid by the Emergency Paid Sick Leave Act.

Amount of Credit

The amount of the credit varies based on cause of the leave: 

  1. The credit is available for up to $511 of sick leave paid per day for employees required to:
    1. self-isolate
    2. obtain a diagnosis
    3. or comply with a self-isolation recommendation with respect to coronavirus
  2. The credit is capped at $200 per day for sick leave paid to employees required to care for a family member or for a child whose school or place
    of care has been closed. 

The credit is limited to 10 days of sick pay per employee. 

 If the credit exceeds the employer’s total liability under section 3111(a) (Employer's Social Security + Medicare Tax) for all employees for any calendar quarter, the excess credit is refundable to the employer. 

Treatment of Leave Payments Under the Act

Payments made under the act are not to be considered wages subject to employer social security tax.