As discussed in prior blog posts, the Families First Coronavirus Response Act (“FFCRA” or the “Act”) will require covered employers to provide certain levels of paid emergency sick leave and paid Family and Medical Leave Act (“FMLA”) leave to employees for specified coronavirus-related reasons. In general, as explained in those posts, the minimum number of hours of the paid sick leave that employers must provide is 80 hours for full time employees, with pro-rated amounts for part time employees based on the average number of hours they work over a two week period. Also, the minimum amount that an employer must pay an employee during that period generally is the lesser of the employee’s regular pay and $511 per day (up to $5,110 in the aggregate), but is the lesser of two-thirds of the employee’s regular pay and $200 per day (up to $2,000 in the aggregate) for an employee who uses the leave to care for a sick family member or a child unable to attend school. In general, as explained in those posts as well, the minimum amount of the paid FMLA leave that an employer must provide is the lesser of two-thirds of the employee’s regular pay and $200 per day (up to $10,000 in the aggregate).
The cost of the required paid emergency sick leave and paid FMLA leave will be refunded to private employers through payroll tax credits. Specifically, under the Act, an eligible employer will receive a payroll tax credit equal to 100 percent of the “qualified sick leave” wages and “qualified family leave” wages paid by the employer for each calendar quarter. The tax credit is allowed against the employer portion of Social Security and Railroad Retirement Tier 1 taxes. In general, “qualified sick leave” is the same as the minimum amount of paid emergency sick leave required by the Act. Thus, for each employee who receives the leave it generally is the lesser of the employee’s regular pay and $511 per day (up to $5,110 in the aggregate), but is the lesser of two-thirds of the employee’s regular pay and $200 per day (up to $2,000 in the aggregate) for employees who use paid sick time to care for a sick family member or a child unable to attend school, and in both cases it is limited to the wages paid for no more than 10 days (typically equivalent to the 80 hours or two weeks required for the leave itself). Similarly, in general, “qualified family leave” is the same as the minimum amount of paid FMLA leave required by the Act. Thus, for each employee who receives the leave it generally is the lesser of two-thirds of the employee’s regular pay and $200 per day (up to $10,000 in the aggregate). Although employers will not necessarily be required to provide health insurance to employees on leave, if they do, the value of the leave will be included in the wages on which the credits are based even though, being nontaxable, they generally would not be included in wages for Social Security or Railroad Retirement tax purposes.
The Act specifies that the credits are refundable, meaning that an employer that has insufficient Social Security or Railroad Retirement taxes still will be able to benefit from them. Furthermore, IR 2020-57, issued on March 20th 2020, announces that guidance expected to be issued soon will permit eligible employers who pay qualified sick or qualified family leave simply to retain an amount of payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS and receive a refund or credit later. It also announced that procedures will be established soon for a prompt refund for any qualified sick or qualified family leave in excess of any payroll taxes retained.
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