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The rapid spread of the COVID-19 virus has begun to initiate an economic downturn and spurred a series of rapid responses on the part of the government. There have been so many proposals and versions floated regarding employee policies during the public health emergency that employers are understandably confused. Though there was an initial belief that the crisis would require businesses to make permanent reductions in their work force in order to survive, the final version of the Act may make these types of drastic actions unnecessary.
President Trump signed the new law on March 19th, and it will take effect on April 2nd. The economic stimulus measures and allowances that it makes will extend through December 31st, 2020. The Act is comprehensive and makes significant changes to previously existing rules regarding both the Family Medical Leave Act (FMLA) and Emergency Paid Sick Leave, as well as in other areas.
The focus of the changes contained in the new law is on companies with fewer than 500 employees. There is already discussion of exemptions for smaller businesses employing fewer than 50 people whose viability may be threatened by these measures. Also, the measures covered in the Act are not pertinent to companies that employ 500 or more employees. Action will likely follow with regard to companies of this size.
Emergency Paid Sick Leave Act
If your company employs fewer than 500 employees, the revised Emergency Paid Sick Leave Act makes them eligible for paid sick leave regardless of how long they have been employed by you.
If an employee of a company that employs fewer than 500 employees is unable to work in person or to telecommute for any of the following reasons, they qualify for paid sick leave:
The Act also includes a provision that an employee qualifies if the employee Is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
Defining the Paid Sick Team BenefitEmployers who provide Emergency Paid Sick Leave benefits and Emergency Child Care Leave benefits will be given refundable tax credits against their Social Security taxes that will refund them fully for qualified sick leave and childcare leave wages under the Act. A similar credit is available for self-employed individuals against their self-employment tax.
Procedure for Claiming this Credit
Under addition guidance that will be later released, eligible employers who pay qualifying sick or childcare leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and childcare leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include:
Accelerated Payment - If there are not sufficient payroll taxes to cover the cost of qualified sick and childcare leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure are forthcoming.
Example - If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
Example - If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Self-Employed Individuals - Equivalent childcare leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
Small Business Exemption - Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or childcare unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer's business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.
Non-Enforcement Period - The Labor Department will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.
Let us know if you have additional questions or need help in deciding what is the best option for you.
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