With the recent surge in COVID-19 cases, employers should refamiliarize themselves with the Emergency Paid Sick Leave benefits as extended in The American Rescue Plan Act originally passed in March 2021. While this program is VOLUNTARY for employers, credit is still allowed against applicable employer payroll taxes equal to 100 percent of the qualified sick leave wages paid by such employer for the respective calendar quarter (up to $511 per day). The credit for qualified family or medical leave wages paid by an employer is up to $200 per day.
The credit is limited to the employer payroll taxes for such calendar quarters that were paid on wages paid to all employees. If such credits exceeded the employer’s payroll tax liability in a given quarter, an advanced refund was permitted to be claimed as an offset to the required tax deposits of the employer.
Extension of Families First Coronavirus Response Act (FFCRA) Tax Credits
The requirement that covered employers (those with less than 500 employees) ended December 31, 2020 however, the tax credits were extended for employers who voluntarily provided the benefits through March 31, 2021. ARPA extends the tax credit from April 1, 2021, through September 30, 2021, for employers who voluntarily continue to provide the benefits but also changes the following:
- ARPA expands the reasons for leave available under both the Emergency Paid Sick Leave (EPSL) and the Emergency Family and Medical Leave (EFML). Both types of leave can now be taken:
- when an employee is obtaining a COVID-19 vaccination;
- when an employee is suffering or recovering from side effects related to the COVID-19 vaccination;
- when an employee is accompanying a family or household member or certain other individuals to obtain immunization relating to COVID-19 or to care for a family or household member or certain other individuals recovering from the immunization. (As further clarified by the IRS on July 29, 2021)
- when an employee is seeking or waiting the results of a COVID-19 test if the employee has either been exposed to COVID-19 or the employer has requested the COVID-19 test;
- and the six reasons for leave originally set forth in the FFCRA.
- ARPA “resets the clock” with respect to the 10 days of emergency paid sick leave under the FFCRA. In other words, employers may voluntarily provide employees up to 80 hours of EPSL in the period from April 1, 2021, through September 2021, in addition to any EPSL provided earlier, and be eligible for the corresponding tax credit.
- ARPA increased the aggregate maximum credit for qualified FFCRA family leave to $12,000 (the maximum credit for FFCRA paid sick leave wages remains unchanged). This means that an employer can claim a total tax credit of up to $12,000 per employee which reflects 2/3 of the employee’s regular pay capped at $200 per day for Emergency Family and Medical Leave.
- ARPA imposes a non-discrimination requirement. Employers cannot receive tax credits if paid leave is offered in a manner that favors highly compensated employees, full-time employees, or employees on the basis of tenure. In other words, in order to receive the tax credit, paid leave must be offered to all employees, whether full-time or part-time, hourly or salaried, newly hired or more senior, or highly compensated or receiving minimum wage.
- ARPA provides for reimbursement to employers subject to a collective bargaining agreement for pension plan and apprenticeship program contributions that are allocable to employees paid sick and expanded family leave. Employers with unionized workforces may be eligible for more credits than they were eligible for previously.
Our HR Consulting team has the experience and expertise to help you and your business navigate the far-reaching impacts of the COVID-19 pandemic. Please contact our offices with questions or concerns.