Employers with fewer than 500 employees
March 11, 2021
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Congress recently enacted the American Rescue Plan Act, extending the tax credits for the Families First Coronavirus Response Act (FFCRA) paid leave provisions. Although FFCRA leave is still not required, if employers want to voluntarily take advantage of the tax benefits, there are new rules to take into consideration.
Beginning April 1, 2021, employers may voluntarily provide a new bank of 10 days’ emergency paid sick leave to employees and receive the tax credit for it through September 30, 2021. The Rescue Plan also expands the reasons for taking emergency paid sick leave and emergency family and medical leave to include:
- An employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis.
- An employee is obtaining immunization related to COVID–19 or recovering from any injury, disability, illness, or condition related to such immunization. (This benefit may support employer vaccination programs.)
Additionally, beginning April 1, 2021, employers may voluntarily receive tax credits for permitting employees to take emergency family and medical leave for the same reasons for which emergency paid sick leave is permitted. This means that employees may take advantage of both emergency paid sick leave and emergency family and medical leave for a combined benefit for a qualifying reason, if employers offer both benefits. The Rescue Plan also seemingly eliminated the initial 10-day unpaid portion of emergency family and medical leave. With this change, employers may question whether employees may be able to effectively take, and employers may be able to receive tax credits for, up to 14 weeks of paid leave if both benefits are offered. Regulations supporting the Rescue Plan are expected to be issued in the coming weeks and will hopefully clarify this point.
The amount of the tax credit remains the same for emergency paid sick leave. Specifically, employers can continue to receive tax credit for $200 or $511 per day consistent with the FFCRA; the credit amount is based on the reason for leave taken. However, the emergency family medical leave total tax credit was extended from $10,000 to $12,000 in the aggregate per employee. These tax credits have been extended for qualifying leave benefits voluntarily applied through September 30, 2021.
Employers may not take advantage of the expanded tax credit if they discriminate in favor of highly compensated employees, full-time employees, or employees on the basis of employment tenure with such employer. This protection seems to indicate that employers must provide this benefit across the board without carve outs for certain classes of employees.
Employers should continue to look for updates on this topic as the rules continue to be developed.
- Review the text of the bill here.
- Decide whether to offer a new bank of 10 days’ emergency paid sick leave through September 30, 2021.
- Decide whether to offer expanded emergency family and medical leave through September 30, 2021.
- Notify employees of any policy changes.
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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.
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