The Families First Coronavirus Response Act (“FFCRA“) generally requires U.S. employers with fewer than 500 employees (“Small Employers”) to provide paid sick leave and additional FMLA benefits to their employees.[1] You can read our summary of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act here and here, respectively.

In order to offset some of the costs these provisions impose on Small Employers, the FFCRA also provides a quarterly payroll tax credit equal to 100% of the qualified sick and leave wages paid to employees under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act.

The amount of leave wages taken into account is limited with respect to each individual employee for purposes of the credit.

  • For sick leave wages paid due to an employee’s illness or quarantine, the amount of wages taken into account for purposes of the credit is capped at $511 per day and $5,110 in the aggregate for each employee; and
  • For sick leave wages paid due to an employee’s need to care for others or care for the employee’s child(ren) due to school closures[2], the amount of wages taken into account for purposes of the credit is capped is $200 per day and $2,000 in the aggregate for each employee. Sick leave wages under the FFCRA are available for a maximum of 2 weeks (10 days).
  • For family leave wages paid under the FFCRA, the cap is $200 per day for purposes of the tax credit, up to an aggregate of $10,000. Family leave under the FFCRA[3] is available for a maximum of 12 weeks (60 days), but the first two weeks are unpaid. The employee may choose to substitute other paid leave, including emergency sick leave under the FFCRA, for the first two weeks.

The FFCRA also provides that the amount of the credit attributable to sick leave and family leave may be increased by the amount of the employer’s “qualified health plan expenses” which are allocable to the wages and compensation for which such credit is allowed. For purposes of the tax credit:

  1. “Qualified health plan expenses” are defined as the amounts paid or incurred by an employer to provide and maintain a group health plan[4], to the extent the amounts are excluded from employees’ gross income under Code § 106(a).
  2. Unless otherwise provided by the Secretary of the Treasury, qualified health plan expenses allocated on a pro rata basis among covered employees and pro rata for the period of coverage will be treated as a proper allocation.

The effective date for the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act is April 2, 2020, and those provisions will expire on December 31, 2020 (with the tax credits applying to the wages and compensation paid thereunder).

[1] The Department of Labor may exempt small businesses with fewer than 50 employees when the leave requirements would “jeopardize the viability of the business as a going concern.”

[2] Note this form of special category of sick leave is provided for under the Emergency Paid Sick Leave Act.

[3] Note that emergency family leave under the FFCRA is not coextensive with traditional Family and Medical Leave Act and is limited to leave for when the employee is unable to work (or telework) in order to care for the employee’s child (who is under age 18) because the child’s school or child care provider is closed/unavailable due to a Public Health Emergency.

[4] ”Group health plan” means a plan within the meaning of Code § 5000(b)(1)).