The Families First Coronavirus Response Act (FFCRA) requires employers to provide paid leave to employees under two circumstances: the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (Expanded FMLA). The EPSLA entitles workers up to 80 hours of paid sick time when they cannot work for reasons related to the coronavirus and the Expanded FMLA provides paid leave for when an employee or one of their family members become sick. Employers subject to these provisions are provided relief under the FFCRA and can receive fully refundable tax credits to cover the cost of providing paid leave to their employees. Additionally, employers can claim these credits on their 941 quarterly payroll tax filings.
FFCRA Eligibility
Eligible leave under FFCRA is related leave taken between April 1, 2020 and December 31, 2020, and applies to businesses with fewer than 500 employees. For more complex entities (joint employers) and situations (temporary labor and jointly employed individuals), the Department of Labor can help determine eligibility. Once a business determines eligibility, it should determine what expenses qualify for the tax credit. Qualified leave wages (both sick leave and family leave), qualified health plan expenses, and an employer’s share of Medicare tax are the expenditures identified by the IRS as eligible for tax credit. Below is a list of qualifications for leave eligible for required pay, as defined by the IRS:
- The employee is under a Federal, State, or local quarantine or isolation order related to COVID-19;
- The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
- The employee is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
- The employee is caring for the child of such employee if the school or place of care of the child has been closed, or the child care provider of such child is unavailable, due to COVID–19 precautions;
- The employee is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.
Payment
The amount of required leave to be paid to employees, and the related tax credits, can vary depending on the reason the employee is taking leave. However, the maximum required paid sick leave an employee can receive over a two-week period is $5,110 and the maximum required family paid leave is $10,000 over a ten-week period. The tax credits for qualified health plan costs and employer Medicare tax are directly related to the employees being paid the required paid leave.
For additional information about the required paid leave payroll tax credit provisions and eligibility, please reference the IRS or Department of Labor websites.
If you have any questions regarding paid leave or the credit process, please reach out via email, give us a call at (401) 921-2000, or fill out our online contact us form. For further information regarding COVID-19 assistance programs, please visit our COVID-19 Resources page.