On March 18, 2020, the Senate passed and the president signed H.R. 6201, the Families First Coronavirus Response Act (the Act). In addition to providing free diagnosis testing for COVID-19 and strengthening unemployment benefit programs and certain food assistance programs, the Act expands paid leave in limited situations and includes a new quarterly payroll tax credit intended to fund the mandated paid leave obligation.
Who is required to provide paid leave under the Act and in what amounts?
Only an employer with fewer than 500 employees is a “covered employer” under the Act and will be required to provide two weeks of employee emergency paid sick leave and 10 weeks of paid family leave. Sick leave for employee self-care (due to being quarantined or symptomatic and awaiting diagnosis) is equal to 100 percent of regular pay, up to a maximum of $511 per day. Sick leave provided to an employee caring for others, including children due to school closures, is equal to two-thirds of regular pay, up to a maximum of $200 per day. Family leave, also equal to two-thirds of regular pay, up to a maximum of $200 per day, is limited to employees who are “unable to work (or telework) due to a need for leave to care for a son or daughter under 18 years of age of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency” related to COVID-19. Employers with 500 or more employees are not “covered employers” under the Act and are not required by law to provide such sick or family leave.
May employers receive payroll tax credits for sick leave and family leave not payable pursuant to the Act?
No. Tax credits specified in the Act are intended to offset the cost of providing the mandated paid leave, and the payroll tax credit therefore is available only on mandated wage amounts an employer pays pursuant to the Act. Therefore, an employer with 500 or more employees that is not required to pay qualified sick leave wages under the Act is also not entitled to claim the payroll tax credit on sick pay or family leave wages, regardless of whether the wages relate to COVID-19.
Are the tax credits available to self-employed individuals?
Yes. A self-employed individual who would qualify for paid sick leave or paid family leave under the Act if the individual were an employee is eligible for the equivalent amount of credit against self-employment tax.