In the wake of the current pandemic, the U.S. Congress has responded with several pieces of legislation, one of which is the “Families First Coronavirus Response Act” referred to with the acronym, FFCRA.
At first glance, it looks like a particularly good program with needed help going to employees and a 100% re-imbursement to Employers for the cost.
Basically, the law is intended to compensate employers, via payroll tax credits, for costs incurred in providing their employees with “paid leave for specified reasons related to Covid-19”. The law applies to employers with up to 500 employees.
(Note: For information on TempsPlus staffing software tool to help clients administer the law, go to our FFCRA page.
The law provides that employees are eligible for two weeks of paid leave, at their regular rate of pay, if they are quarantined and/or experiencing Covid-19 symptoms and actively seeking a professional diagnosis.
The amount goes down to two-thirds of their regular pay rate for two weeks of paid leave if they are unable to work because they are caring for an individual subject to quarantine or whose child’s school or childcare provider is closed due to Covid-19.
Under another section of the law (“paid expanded family and medical leave”), the time limit for benefits increases to an additional10 weeks at two-thirds of their regular pay rate. This is for an employee, who has been employed for 30 calendar days, and is unable to work because of a need to care for a child whose school or childcare provider is closed due to Covid-19.
There is an employer exemption that a small business (up to 50 employees) may qualify for if the “paid leave” requirements would jeopardize the financial viability of the business. (This is what the rules actually say, but if it is fully compensated for, with immediate payroll tax offsets, I think it would be hard for a small business to qualify for this exemption.
Although there are guidelines and program requirements there is an easing of these requirements for a 30-day period for good faith compliance. This is probably to speed-up the process.
Nice features of the program are as follows.
- An immediate dollar-for-dollar tax offset against payroll taxes is provided, and
- A second is where a refund is due, the IRS will provide it on an expedited basis.
- The cost of the employee’s health insurance is included in the amount that is reimbursed to employers.
- Employers face no payroll tax liabilities for the amounts paid out.
- Although this may not apply to most staffing companies, “self-employed” individuals can also receive equivalent tax credits. They can use these credits on their income tax or on their quarterly tax estimates.
This“immediate reimbursement” feature allows employers simply to withhold from their payroll taxes the entire cost of the program including employer paid medical premiums.
For example, if the employer paid out $10,000 in total sick leave benefits and is otherwise required to deposit $8,000 in taxes, he can use the entire $8,000 to pay for the sick leave program then file a request for an accelerated credit or refund for the $2,000 balance.
What the IRS means by “an accelerated refund” may not be what you or I might have in mind but let’s take them at their word. I think they are really trying to help.
I also like the principle here, i.e. you do not send the money to Washington then apply to get it back. You just do not send it in the first place . . . and especially in this emergency.
And don’t forget, If you are a Bridgeware client using our TempsPlus staffing software, we have developed a fully integrated software tool to help you manage the FFCRA process; i.e. eligible employees for both the 2 week and 10 week sick leave, pay rates, averaging hours worked per week this year to determine benefit calculations, medical insurance contributions, payroll tax credits,etc.
Please visit our FFCRA page and/or call our support at 1.800.533.8367 or email firstname.lastname@example.org.
We have not missed a support call since this national emergency began, and we will continue with complete “screen to screen” connectivity. For emergencies we will still be available 24/7/365.