As you may be aware, Congress has enacted the Families First Coronavirus Response Act to provide relief for employees and employers during the conditions occasioned by COVID-19. The FFCRA will be effective from 4/1/2020 to 12/31/2020. Covered employers (generally those employers with fewer than 500 employees and government employers) must comply with its provisions, but as a result, several payroll tax credits may be available. It is important to note that compliance with the FFCRA does not relieve employers of compliance with other Federal, California or other state and/or local leave laws. In addition, please note that there are additional state and local sick leave laws that may apply to employers with more than 500 employees.
WHAT ARE YOUR RESPONSIBILITIES UNDER THE FFCRA?
1.Emergency Paid Sick Leave Act Provisions
- The FFCRA provides for full-time employees to receive up to 10 days/80 hours of paid leave for any one of 6 reasons related to COVID-19:
- The employee is subject to a federal, state or local quarantine or isolation order
- The employee has been advised by a healthcare provider to self-quarantine
- The employee is experiencing symptoms of COVID-19 and is seeking medical diagnosis
- The employee is caring for an individual who is subject to a federal, state or local quarantine order or has been advised by a healthcare provider to self-isolate
- The employee is caring for their son or daughter when school or daycare is closed or otherwise unavailable due to COVID-19 precautions
- The employee is experiencing similar conditions specified by the Secretary of Health and Human Services
- For part-time employees, the number of hours will depend on the normal or average hours worked over a two week period.
2. Emergency Family and Medical Leave Expansion Act Provisions
- Employees who are unable to work (including remotely) because they need to care for a child under 18 whose school or daycare is closed due to COVID-19 may be entitled to 12 weeks of FMLA leave.
- The first 2 weeks may be unpaid, although employee may elect to use paid time off (and may apply the 2 weeks from the Emergency Paid Sick Leave Act pay [above]).
- The remaining 10 weeks are paid at 2/3 of an employee’s regular rate up to $200 per day/$10,000 in the aggregate.
- Employees are to be restored to the same or equivalent position upon return. If a position is not available, the employer has an ongoing obligation (for one year) to contact the employee should a position become available. (There is an exception for employers with fewer than 25 employees.)
3. Other Requirements
- Intermittent leave is permitted as agreed upon by employer and employee, subject to additional provisions depending on whether employee works remotely or at jobsite.
- Employees covered by multi-employer collective bargaining agreements may be able to receive payments from the plan, fund or program.
- DOL Notice of Employee Rights under the FFCRA to be posted as of 3/25/2020.
- Businesses with fewer than 50 employees may qualify for an exemption where compliance threatens the viability of the business as a going concern.
- An employer can exempt employees who are healthcare providers (as defined under FMLA) or emergency responders.
HOW CAN EMPLOYERS RECOVER AMOUNTS PAID UNDER THE FFCRA?
1. Employer Tax Credit for Paid Leave
- Employers with fewer than 500 employees will receive 100% reimbursement for the qualified paid sick leave provided to their employees, subject to the limits (below). The credit also includes the pro rata amount of an employer’s health insurance costs.
- Self-employed individuals can also receive an equivalent credit.
- Employers can take an immediate dollar for dollar tax offset against payroll taxes by keeping and using funds that would otherwise be paid to the IRS in their payroll taxes.
- If the tax amount does not cover the employer’s cost of paid leave, businesses can seek an expedited advance from the IRS by submitting Form 7200 (Advance Payment of Employer Credits Due to COVID-19) .
- If an eligible employer paid $5,000 in sick leave and would normally be required to deposit $8,000 in payroll tax (including taxes withheld from all its employees) the employer could use up to $5,000 and would only be required under the law to deposit the remaining $3,000 on the 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 request an accelerated credit for the remaining $2,000.
Qualified Limits for Paid Sick Leave Credit:
- Employers can claim a sick leave credit of up to $511 per day (not to exceed $5110 for 10 days) per employee, if the employee is unable to work due to Coronavirus quarantine, self-quarantine, or who has Coronavirus symptoms and is seeking a medical diagnosis.
- Employers can claim a sick leave credit for two-thirds of the employee’s regular rate of pay, up to $200 per day (not to exceed $2000 for up to 10 days) for an employee who is caring for someone with Coronavirus, or is caring for a child because the child’s school or childcare facility is closed, or the child care provider is unavailable due to the Coronavirus.
Qualified Limits for Child Care Leave Credit:
- Employers can claim a childcare leave credit of two-thirds of the employee’s regular pay, capped at $200 per day (not to exceed $10,000). Up to 10 weeks of qualifying leave can be counted toward the childcare leave credit.
- Eligible employers are entitled to an additional tax credit based on cost to maintain health insurance coverage for the eligible employee during the leave period.
2. Social Security Payroll Tax Deferral
- The employer portion of Social Security is 6.2% for each employee. The FFCRA allows employers to defer their share of the 2020 Social Security taxes, and to split the payment in two parts.
- The first half of the deferred taxes would be due by December 31, 2021 and the second half of the deferred amount due by December 31, 2022.
- No interest is owed for the deferral.
3. Employee Retention Credit
The Employee Retention Credit is designed to help eligible employers retain employees on their payroll.
- The refundable tax credit is for 50% of qualifying employee wages (up to a maximum of $10,000) for an employer financially impacted by COVID-19.
- This credit applies to wages paid from March 13, 2020 through December 31, 2020.
- Eligible wages may also include a portion of the cost of allocable employer-provided health care.
- Employers of all sizes are eligible for the credit, including tax-exempt organizations.
- Exceptions – State and local governments (and their agencies), and businesses who take COVID-19 related small business loans are not eligible.
- The employer’s business has been fully or partially suspended by government order due to COVID-19.
- The employer’s gross receipts are below 50% of the comparable quarter in 2019.
- Once the employer’s gross receipts are above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
Which Wages Qualify:
- Qualifying wages are based on the average number of workers employed in 2019:
- For employers with less than 100 employees (on average) in 2019, the credit is based on wages paid to all employees, regardless of whether they worked or not.
- For employers with more than 100 employees (on average) in 2019, the credit is only allowed for wages paid to employees who did not work during the calendar quarter.
How to Receive the Credit:
- For immediate reimbursement, employers can reduce their required payroll tax deposits by the amount of the credit.
- Employers report their total qualified wages (and related health insurance costs) on their quarterly tax returns or Form 941, beginning with the second quarter.
- If employment tax deposits do not cover the credit, the employer may receive an advance payment by submitting Form 7200 to the IRS.
- An advance of the Employee Retention Credit can also be requested by submitting Form 7200.
4. State Payroll Tax Extension
- If there is hardship related to COVID-19, employers may request up to a 60-day extension from the EDD to file state payroll reports and/or deposit state payroll taxes without penalty or interest.
- A written request must be received within 60 days from the original delinquent date of the payment or return.
The information above is current as of 4/6/2020. Please be advised that these are temporary regulations, and are all subject to change.
Please contact us if you have any questions or need additional information.