Get a quick overview of the paid leave requirements and tax credits that are available to small businesses under the new Families First Coronavirus Response Act (FFCRA).
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The Families First Coronavirus Response Act: A quick overview of paid leave and tax credits

Last updated: 8/31/2020

 

In April 2020, the Families First Coronavirus Response Act  (H.R. 6201) was signed into law to help small businesses and their employees during the COVID-19 outbreak. The Act is designed to provide employees of most small businesses with paid leave, to address their own health needs or to care for family members. And it gives their employers two new, refundable payroll tax credits, which are designed to immediately provide dollar-for-dollar reimbursement for the cost of providing Coronavirus-related leave to their employees.

 

This legislation will enable employers to keep their workers on their payrolls, while also ensuring that workers are not forced to choose between their paychecks and the things they need to do to stay healthy, protect public health, and combat the virus.

 

More on COVID-19 and small businesses

 

We’ve built a resource center with frequently updated information for running your business, taking care of your team, and learning what OnPay’s doing to help.

 

Visit our resource center

 

Families First Act Highlights and FAQs

Many details are still emerging as the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor roll out guidance. IRS publication IR-2020-57 provides a good overview of the guidance that is currently available. Also note that there are regular updates about these and other new developments on the IRS Coronavirus page.

 

Here are quick answers to some of the key questions many employers have:

 

When do the requirements of the FFCRA go into effect?

The new law goes into effect on April 1, 2020 and its provisions will end on December 31, 2020. To ease the transition, requirements are subject to a 30-day non-enforcement period for businesses that make a good faith effort to comply.

 

Is there anything employers need to do right now?

Yes! Employers who qualify for the Act (see the next section) need to notify their employees about rights under the act. You can meet this requirement by either posting this notice from the Department of Labor in your place of business, or by sending it to employees by email or postal mail. For more information about these requirements, see our detailed article and sample letter.

 

Your employees may have additional questions, so you may also want to share the Department of Labor’s employee fact sheet, too.

 

Which small businesses are required to provide paid leave (and are eligible for the tax credits)?

The Act applies to most small businesses with fewer than 500 employees. There are two exceptions:

 

  1. Businesses with fewer than 50 employees will be eligible to claim an exemption from some leave requirements if complying with them would “jeopardize the viability of the business as a going concern”.
  2. Employers of health care providers or emergency responders may elect to exclude those employees from the expanded paid or family leave benefits.

See the complete FFCRA guidance for more detailed FAQs.

 

When is an employee entitled to take leave under the Act?

No matter how long they’ve been working for you (different for family leave – see 2.a below), full and part-time employees are entitled to paid sick leave if they:

 

  1. Are under a federal, state, or local order for quarantine or isolation in response to COVID-19.
  2. Have been advised by a doctor or health care provider to self-quarantine due to COVID-19.
  3. Are experiencing symptoms of COVID-19 and are seeking or awaiting testing or diagnosis.
  4. Are caring for a family member who is under a quarantine order or has been advised to self-quarantine in response to COVID-19.
  5. Are caring for a child whose school or place of care has been closed or is unavailable due to COVID-19.
  6. Are experiencing any substantially similar condition or circumstances to those in items 1-5 above.

 

How much paid leave are employees entitled to under the Act?

Generally, an employer may be required to provide paid leave in two different ways under the FFCRA:

 

  1. Up to two weeks of paid sick leave (80 hours, or the average pay for two weeks for a part time employee). Sick leave payments are based on the higher of their regular rate of pay (or the applicable state or Federal minimum wage if it’s higher than the employee’s regular rate).
    1. If an employee takes leave for reasons 1 – 3 above, they should be paid at 100% of their average pay, up to $511 daily and $5,110 total.
    2. If an employee takes leave for reasons 4 – 6 above, they should be paid two thirds of their average pay, up to $200 daily and $2,000 total.

    Please note:  If an employer chooses to offer paid leave wages that are higher than the Act requires, those additional wages are not reimbursable.

  2. Up to 12 weeks of paid family and medical leave if an employee takes leave for reason number five above. An employee taking family and medical leave is entitled up to two thirds of their average pay, up to $200 daily and $12,000 total (this includes the two weeks and $2,000 from 1b above). A part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period. Please note:  Employees must be on the job for at least 30 calendar days to be eligible for emergency family leave and are also entitled to job protection during their leave.

 

What exactly does “job protected” mean? What has to happen when an employee returns from leave?

Generally, the FMLA requires employers to restore employees to the same or equivalent position when they return to work. There are some exceptions for employers with fewer than 25 employees:

 

  • The employee’s position no longer exists due to an economic downturn or other circumstances caused by a public health emergency.
  • The employer made reasonable attempts but was unable to return the employee to an equivalent position for up to a year following the employee’s leave.

 

Can employees be required to use vacation or other sick time first?

No, employees cannot be required to use other paid time off before utilizing paid sick leave.

 

Are self-employed individuals eligible for emergency paid sick leave?

Yes, self-employed individuals will be eligible for a refundable tax credit applicable to:

 

  • 100% of qualified sick leave for a self-employed individual in quarantine for COVID-19.
  • 67% of qualified wages for a self-employed individual when caring for a quarantined family member or child whose school or place of care was closed due to COVID-19.

To qualify for emergency paid sick leave, is there a minimum number of days the employee must have worked?

No, there is no minimum number of worked days required for an employee to be eligible. Emergency paid sick leave is available for immediate use regardless of how long the individual has been employed.

 

How much of these costs are employers responsible for?

Employers will receive reimbursement for paid leave wages that are required by the Act. Please note that:

 

  • Health insurance costs are also included in the credit
  • If an employer chooses to offer paid leave wages that are higher than the Act requires, those additional wages are not reimbursable.

 

How quickly will employers be reimbursed?

Reimbursement will be quick and easy to obtain. The Act creates:

 

  • An immediate dollar-for-dollar tax offset against payroll taxes, up to established limits.
  • In cases where a refund is owed, the IRS will send it as quickly as possible. An expedited process for streamlined claims is being developed by the IRS.
  • Qualified paid sick and family/medical sick wages incurred by an employer will be eligible for a refundable tax credit against the employer’s portion of Social Security taxes.

 

My employee’s child’s school is operating on an alternate day (or other hybrid-attendance) basis. The school is open each day, but students alternate between days attending school in person and days participating in remote learning. They are permitted to attend school only on their allotted in-person attendance days. Can an employee take paid leave under the FFCRA in these circumstances?

Yes, employees are eligible to take paid leave under the FFCRA on days when their child is not permitted to attend school in person and must instead engage in remote learning, as long as they need the leave to actually care for their child during that time and only if no other suitable person is available to do so. For purposes of the FFCRA and its implementing regulations, the school is effectively “closed” to their child on days that he or she cannot attend in person. They may take paid leave under the FFCRA on each of their child’s remote-learning days.

 

My employee’s child’s school is giving them a choice between having their child attend in person or participate in a remote learning program for the fall term. They signed up for the remote learning alternative because, for example, they worry that their child might contract COVID-19 and bring it home to the family. Since their child will be at home, can they take paid leave under the FFCRA in these circumstances?

No, they are not eligible to take paid leave under the FFCRA because their child’s school is not “closed” due to COVID-19 related reasons; it is open for their child to attend. FFCRA leave is not available to take care of a child whose school is open for in-person attendance. If their child is home not because his or her school is closed, but because they have chosen for the child to remain home, they are not entitled to FFCRA paid leave. However, if, because of COVID-19, their child is under a quarantine order or has been advised by a health care provider to self-isolate or self-quarantine, they may be eligible to take paid leave to care for him or her. See FAQ 63.

 

My employee’s child’s school is beginning the school year under a remote learning program out of concern for COVID-19 but has announced it will continue to evaluate local circumstances and make a decision about reopening for in-person attendance later in the school year. Can they take paid leave under the FFCRA in these circumstances?

Yes, they are eligible to take paid leave under the FFCRA while their child’s school remains closed. If their child’s school reopens, the availability of paid leave under the FFCRA will depend on the particulars of the school’s operations.

 

The full 100-question Department of Labor FAQ is available here.

 

 

To learn more about the FFCRA and other related relief for small businesses, visit our Resource Center. You can also find more detailed information about the leave and tax credits under the FFCRA on the Department of Labor’s Pandemic Response site.

 

 

This article is for informational purposes only and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors for formal consultation.

 

 

Erin Ellison is the Content Marketing Manager for OnPay. She has more than 15 years of writing experience, is a former small business owner, and has managed payroll, scheduling, and HR for more than 75 employees. She lives and works in Atlanta.

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