President Trump signs the Families First Coronavirus Response Act on March 18, 2020.
Photo by Shealah Craighead, courtesy The White House on Flickr.While Congress squabbled yesterday over what is likely to be the biggest economic stimulus package in history – if the two parties ever agree on something – small business operators were preparing for new rules on paid leave that take effect next week.
On balance, the rules under the Families First Coronavirus Relief Act, which President Donald Trump signed on March 18, are good news for enterprises that employ fewer than 500 workers. For once, lawmakers agreed to pay for the mandates they imposed. And those mandates actually are a considerable help to owners who are trying to keep businesses operating while protecting employee health and the company workforce.
The new rules take effect April 2. As of that date, most companies must offer full-time employees up to 80 hours of paid leave if the employee is under a quarantine or isolation order, has been advised by a health care provider to self-isolate, or is suffering from COVID-19 symptoms and seeking diagnosis. (Part-time employees are entitled to paid time equal to their average number of hours worked in a two-week period.) This leave must be at full pay, up to $511 per day and a maximum of $5,110 per employee. If an employee is caring for another individual who is under the same constraints or is awaiting diagnosis, or for a child whose school or day care is unavailable due to the virus, the leave must be made available at two-thirds of the employee’s pay, up to $200 per day and $2,000 per worker.
Beyond these requirements, employers must provide another 12 weeks of job-protected leave for workers who stay home to care for children whose school or day care is unavailable due to COVID-19. This leave is an expansion of the Family and Medical Leave Act, usually shortened FMLA. But unlike traditional FMLA leave, leave for a “qualifying need related to a public health emergency” cannot be wholly unpaid. The first 10 days of this leave can be unpaid, or the employee can opt to use available paid leave from the employer's normal policies. But the remaining 10 weeks must be at two-thirds the worker’s normal pay, subject to limits of $200 per day and $10,000 per worker. Businesses with fewer than 50 workers can seek hardship exemptions from the Labor Department, but the department has not yet issued those rules.
These requirements are national minimums. In some places, state or local laws have more generous paid leave mandates. The law also stipulates that employers should offer the emergency leave in addition to, not instead of, their existing policies or state requirements.
This is the good news for workers. For business owners, the bright spot (apart from the incentive to do something helpful for employees) is that the government is willing to pick up the tab for this largesse.
The Treasury issued a notice last week assuring employers that they can reimburse themselves for these costs by pocketing payroll taxes they would otherwise have to remit to Washington. Thus, the cost of the benefits comes directly out of the federal income taxes, and the worker and employer share of FICA and Medicare taxes, that every employer withholds and pays. The bookkeeping will likely be squared up on the quarterly payroll tax returns that, for most employers, will be due in July, October and January. The new benefits are set to expire on Dec. 31.
For employers who do not withhold enough in payroll tax to cover the new benefits, the Internal Revenue Service is expected to announce an expedited refund procedure. That process should put the money back into the employer’s bank account within two weeks of filing a claim.
The Families First Coronavirus Relief Act means that many small firms, including ours, will change how they are tracking time off for employees during the pandemic. As I have mentioned in this space before, Palisades Hudson is encouraging as much of our staff as possible to work from home. But at least through April 15, we are also permitting staff to take time off without drawing from their normally accrued hours, at their discretion for any reason. Going forward, our staff will need to specify whether the reason falls among those covered by the new law. This way, we can accurately claim credits when the law permits. Other covered businesses offering leave more expansive than the law’s requirements will likely institute similar systems.
While welcome, this policy is a small down payment on the help many thousands of businesses – large and small – will need to survive, and keep their workforce intact, until the pandemic emergency subsides. The biggest problem is not how to pay workers who are sick; it is paying workers who have no work at all. Hundreds of millions of Americans have been told to stay home, and businesses have been ordered to close their doors with no clear end date. This has already led to widespread job loss. Then there are the landlords, mortgage holders and other creditors who expect to see their obligations honored, and who may quickly fall into financial trouble themselves if they are not.
Keeping businesses open and employment relationships in place is the key to a rapid financial recovery from the pandemic. Expanded sick and family leave will not help an individual who has no job from which to take leave or to which they can return. While business owners are waiting for Congress to establish the scope and terms of further aid, we can at least get ready to fulfill the promise of extra paid leave to those who need it.
Posted by Larry M. Elkin, CPA, CFP®
President Trump signs the Families First Coronavirus Response Act on March 18, 2020.
Photo by Shealah Craighead, courtesy The White House on Flickr.
While Congress squabbled yesterday over what is likely to be the biggest economic stimulus package in history – if the two parties ever agree on something – small business operators were preparing for new rules on paid leave that take effect next week.
On balance, the rules under the Families First Coronavirus Relief Act, which President Donald Trump signed on March 18, are good news for enterprises that employ fewer than 500 workers. For once, lawmakers agreed to pay for the mandates they imposed. And those mandates actually are a considerable help to owners who are trying to keep businesses operating while protecting employee health and the company workforce.
The new rules take effect April 2. As of that date, most companies must offer full-time employees up to 80 hours of paid leave if the employee is under a quarantine or isolation order, has been advised by a health care provider to self-isolate, or is suffering from COVID-19 symptoms and seeking diagnosis. (Part-time employees are entitled to paid time equal to their average number of hours worked in a two-week period.) This leave must be at full pay, up to $511 per day and a maximum of $5,110 per employee. If an employee is caring for another individual who is under the same constraints or is awaiting diagnosis, or for a child whose school or day care is unavailable due to the virus, the leave must be made available at two-thirds of the employee’s pay, up to $200 per day and $2,000 per worker.
Beyond these requirements, employers must provide another 12 weeks of job-protected leave for workers who stay home to care for children whose school or day care is unavailable due to COVID-19. This leave is an expansion of the Family and Medical Leave Act, usually shortened FMLA. But unlike traditional FMLA leave, leave for a “qualifying need related to a public health emergency” cannot be wholly unpaid. The first 10 days of this leave can be unpaid, or the employee can opt to use available paid leave from the employer's normal policies. But the remaining 10 weeks must be at two-thirds the worker’s normal pay, subject to limits of $200 per day and $10,000 per worker. Businesses with fewer than 50 workers can seek hardship exemptions from the Labor Department, but the department has not yet issued those rules.
These requirements are national minimums. In some places, state or local laws have more generous paid leave mandates. The law also stipulates that employers should offer the emergency leave in addition to, not instead of, their existing policies or state requirements.
This is the good news for workers. For business owners, the bright spot (apart from the incentive to do something helpful for employees) is that the government is willing to pick up the tab for this largesse.
The Treasury issued a notice last week assuring employers that they can reimburse themselves for these costs by pocketing payroll taxes they would otherwise have to remit to Washington. Thus, the cost of the benefits comes directly out of the federal income taxes, and the worker and employer share of FICA and Medicare taxes, that every employer withholds and pays. The bookkeeping will likely be squared up on the quarterly payroll tax returns that, for most employers, will be due in July, October and January. The new benefits are set to expire on Dec. 31.
For employers who do not withhold enough in payroll tax to cover the new benefits, the Internal Revenue Service is expected to announce an expedited refund procedure. That process should put the money back into the employer’s bank account within two weeks of filing a claim.
The Families First Coronavirus Relief Act means that many small firms, including ours, will change how they are tracking time off for employees during the pandemic. As I have mentioned in this space before, Palisades Hudson is encouraging as much of our staff as possible to work from home. But at least through April 15, we are also permitting staff to take time off without drawing from their normally accrued hours, at their discretion for any reason. Going forward, our staff will need to specify whether the reason falls among those covered by the new law. This way, we can accurately claim credits when the law permits. Other covered businesses offering leave more expansive than the law’s requirements will likely institute similar systems.
While welcome, this policy is a small down payment on the help many thousands of businesses – large and small – will need to survive, and keep their workforce intact, until the pandemic emergency subsides. The biggest problem is not how to pay workers who are sick; it is paying workers who have no work at all. Hundreds of millions of Americans have been told to stay home, and businesses have been ordered to close their doors with no clear end date. This has already led to widespread job loss. Then there are the landlords, mortgage holders and other creditors who expect to see their obligations honored, and who may quickly fall into financial trouble themselves if they are not.
Keeping businesses open and employment relationships in place is the key to a rapid financial recovery from the pandemic. Expanded sick and family leave will not help an individual who has no job from which to take leave or to which they can return. While business owners are waiting for Congress to establish the scope and terms of further aid, we can at least get ready to fulfill the promise of extra paid leave to those who need it.
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