Questions and Answers from the Greenshades Compliance Team.
Families First Coronavirus Response Act Employer FAQ
Please consider this page to be a “living document,” meaning we’ll continue to update and revise as necessary. As such, note the day, date, and time of the last update so you can ensure you’re always referring to the latest version. Last updated 04/10/20 4:00PM EDT.
Q. What exactly is included in the Families First Coronavirus Response Act?
A. The Families First Coronavirus Response Act (FFCRA) is made up of two parts. First, it establishes an emergency two-week pool of paid sick leave (ERPDSLA) for employees who meet specific criteria. This sick leave will be initially paid by the employer, but the employer portion of Social Security Tax can be later reduced by the amount paid. This is a dollar-for-dollar tax credit, meaning the Federal Government ends up paying for the paid sick leave taken by your employees. If the credit exceeds an employer’s normal tax payment, then they will be reimbursed for the excess.
Secondly, the act expands FMLA to include provisions for paid leave related to COVID-19 childcare. Eligible employees may take 12-weeks of leave without being subject to discrimination because of the leave and without being required to find a replacement worker. There is no FMLA payment provision for the first 10 days of leave (although the employee may use ERPDSLA or employer-provided PTO during this time). After the first 10 days, the leave is paid for the remaining 12-week period. Once again, the federal government will reimburse employers for the paid portion of this leave as a credit to the employer portion of social security tax.
Q. Does the Act apply to all employers?
A. No. The new paid sick leave pool is for public sector companies or private-sector companies with 500 employees or less. Also, if your company is 50 employees or less, and you can show that the viability of your business would be threatened by offering this new sick leave, then you may request exemption.
As of March 26, 2020, neither the Department of Treasury nor IRS have provided the guidelines for requesting small business exemptions.
Q. When does the small business exemption apply to exclude a small business from the provisions of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act?
A. An employer, including a religious or nonprofit organization, with fewer than 50 employees (small business) is exempt from providing (a) paid sick leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons and (b) expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern. A small business may claim this exemption if an authorized officer of the business has determined that:
1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
Q. What are the employee eligibility requirements for the Paid Sick Leave?
A. The paid sick leave is available to both full-time and part-time employees. Full-time employees receive 80 hours to use over a maximum of 10 days. Part-time employees receive a number of hours based on their average work schedule, which should be calculated using the average number of hours the employee has worked per week over the past 6 months. If an employee has not been employed for 6 months, the number of hours that an employer communicated as the expected scheduling needs, at the time of hire, should be used.
Q. What is the rate of pay for the Paid Sick Leave?
A. There are two categories of eligibility, which provide different hourly rates of pay. If an employee meets any of the following criteria, then they are eligible for 100% of their hourly rate* (capped at $511 per day):
- Subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- Advised by a healthcare provider to self-quarantine due to concerns related to COVID-19.
- Experiencing symptoms of COVID-19 and seeking a medical diagnosis/testing.
Alternatively, if an employee meets any of the following criteria, then they are eligible for two-thirds of their hourly rate* (capped at $200 per day):
- Caring for an individual who meets the first set of criteria (quarantined or seeking diagnosis)
- Caring for their child and their school or childcare has been closed due to COVID-19 precautions.
* In both cases, if the employee’s base rate of pay is under the federal, state, or local minimum wage, then the minimum wage should be used in place of their normal rate of pay.
Q. Can I require my employees to take their standard sick/vacation time before using this new government pool?
A. No. Employees have the right (but not the obligation) to take the new paid sick leave pool before using their traditional employer-provided time-off.
An employee in the second tier of eligibility may wish to take their traditional time-off in order to be paid at a full rate instead of two-thirds. Also, an employee may wish to use their traditional time-off in order to avoid a cap on the payments. Regardless, eligible employees have the right to choose which type of time-off they will take.
Q. What exactly is the expansion to FMLA?
A. The expansion to FMLA is completely separate, but related, to the additional sick leave pool described above. FMLA has been a longstanding tool that allows employees to take leave from their job to care for family members without facing discrimination for the leave and without being forced to find a replacement worker. The government has added a new provision to FMLA to expand eligibility. An employee is now eligible for FMLA if they are caring for a child that has been impacted by a school or care facility closure as a result of the COVID-19 health emergency.
The Act also provides 12 weeks of FMLA leave for employees that are taking care of a family member related to the COVID-19 health emergency, including the care of dependent children under the age of 18 who are without regular school or childcare as a result of facility closure. The first 2 weeks are unpaid but an employee can take any available PTO to cover the hours that are unpaid by the FFCRA FMLA. Up to 10 weeks of FMLA will be available for employees who are in qualifying situations. Paid leave benefits will provide no less than 2/3 of the employees regular rate of pay, up to a daily maximum of $200.
Q. Is this expansion of FMLA available to all employers and employees?
A. No. As with the leave, the expansion applies to employers with fewer than 500 employees and also provides a possible exemption for employers with fewer than 50 employees if the viability of the business would be threatened.
Employees are only eligible if they have worked for their employer for more than 30 days, regardless of how many hours they have worked.
Q. How many hours are provided under the FMLA expansion?
A. The job protections under FMLA apply for 12 weeks. The first 2 weeks do not have a payment provision, but the final 10 weeks are paid. FMLA leave cannot extend past 2020.
Employees can use either their normal employer-provided time-off or else this new national sick leave pool for the first two weeks of FMLA. As such, we expect many interested employees will take up to 12 weeks of paid leave from their workplace, starting with 2 weeks paid through the new paid sick leave pool (or their traditional time-off balance) and the final weeks are paid through FMLA.
Full-time employees are granted 40 hours per week. For part time employees, the number of hours is based on the hours the employee would have been scheduled to work. For variable-schedule employees, employers should use the average number of hours that an employee has worked for the previous 6-month period.
Q. What is the rate of payment for employees paid under FMLA?
A. The first two weeks of FMLA do not have a payment provision. After the first two weeks, employees are eligible to receive two-thirds their regular rate of hourly pay, not to exceed $200 per day or $10,000 for the entire leave.
Q. Is an employer allowed to “lay-off” an employee while they are on FMLA?
A. As with traditional FMLA regulations, employers with over 25 employees are not permitted to discriminate against employees for taking FMLA. Employers may not eliminate an employee’s position or terminate an employee because they have elected FMLA. An employer may terminate an employee on FMLA-protected leave if the termination is for reasons completely unrelated to the leave (pre-existing intent, discovery of other cause, or significant change in business plans).
Q. What should I do as an employer to prepare myself for these changes?
A. First, announce to your employees the availability of a new pool of time-off in addition to whatever your company normally offers. This is a two-week pool and it is available in 2020 for employees who meet the criteria. Also, inform them of the expansion to FMLA that is also available to them.
Secondly, set up additional time-off codes within your payroll system in order to track this new time-off. We recommend that you create two separate codes for the sick leave (one for each type of eligibility) and one for the paid FMLA. Greenshades will work with you to ensure the codes are set up properly and will be properly recognized when completing your taxes.
Third, coordinate with your tax partner (such as Greenshades) to ensure you will make reduced 941 payments and properly report the credit on your 941 returns. It is imperative to document, pay, and report properly in order to take advantage of this relief.
Q. What is the effective date of the Families First Coronavirus Response Act (FFCRA), which includes the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act?
A. The FFCRA’s paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020.
Q. How do the self-employed claim this credit?
A. Self-employed can make estimated payments throughout the year to meet their tax liability calculated at year-end.
This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020. First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020. Second quarter 2020 estimated income tax payments are still due on June 15, 2020.
Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. You will automatically avoid interest and penalties on the taxes paid by July 15
E-News for Payroll Professionals: COVID-19 and more: Issue Number 2020-04
Q. For self-employed, what form will they need to file to get the refund? How do self-employed get paid for the credit for the paid sick leave and family leave?
A. There are no special forms to use to get the credit. It will be provided through the estimated payments and the final year end TY 2020 filing.
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.
Q. What is the Payroll Tax Deferral that I keep hearing about?
A. Under section 2302 of the CARES Act signed into Law on March 27th, 2020 all employers may elect to defer payment of the 6.2% employer social security tax through December 31, 2020. Per IRS notice 2020-22 under this provision employers are treated as having timely made the required deposits if all deposits are made by the adjusted due dates of December 31st, 2021 and December 31st, 2022. While there is currently no form filing requirement prior to the deferral of employer social security taxes the IRS is expected to revise the 941 to track employer’s decision to defer tax deposits.
Q. Because there is a Grace Period for Compliance does this mean that I can wait to implement FFCRA provisions?
A. No, as the provisions are effective April 1st, 2020 companies must comply as of the effective date. The Department will fully enforce violations back to the effective date of enactment (April 1st, 2020) and employers are expected to comply and correct any violations.
Q. What kind of proof or documentation does the employee need to provide to use when requesting the leave?
A. § 826.100 Documentation of Need for Leave.
(a) An Employee is required to provide the Employer documentation containing the following information prior to taking Paid Sick Leave under the EPSLA or Expanded Family and Medical Leave under the EFMLEA:
(1) Employee’s name;
(2) Date(s) for which leave is requested;
(3) Qualifying reason for the leave; and
(4) Oral or written statement that the Employee is unable to work because of the qualified reason for leave.
(b) To take Paid Sick Leave for a qualifying COVID-19 related reason under § 826.20(a)(1)(i), an Employee must additionally provide the Employer with the name of the government entity that issued the Quarantine or Isolation Order.
(c) To take Paid Sick Leave for a qualifying COVID-19 related reason under § 826.20(a)(1)(ii) an Employee must additionally provide the Employer with the name of the health care provider who advised the Employee to self-quarantine due to concerns related to COVID-19.
(d) To take Paid Sick Leave for a qualifying COVID-19 related reason under § 826.20(a)(1)(iii) an Employee must additionally provide the Employer with either:
(1) the name of the government entity that issued the Quarantine or Isolation Order to which the individual being care for is subject; or
(2) The name of the health care provider who advised the individual being cared for to self quarantine due to concerns related to COVID-19.
(e) To take Paid Sick Leave for a qualifying COVID-19 related reason under § 826.20(a)(1)(v) or Expanded Family and Medical Leave, an Employee must additionally provide:
(1) the name of the Son or Daughter being cared for;
(2) the name of the School, Place of Care, or Child Care Provider that has closed or become unavailable; and
(3) a representation that no other suitable person will be caring for the Son or Daughter during the period for which the Employee takes Paid Sick Leave or Expanded Family and Medical Leave.
(f) The Employer may also request an Employee to provide such additional material as needed for the Employer to support a request for tax credits pursuant to the FFCRA. The Employer is not required to provide leave if materials sufficient to support the applicable tax credit have not been provided.
Q. How do I determine the 500 employee threshold for the company under FFCRA to determine if paid leave must be provided?
A. § 826.40 of the Department of Labor Wage and Hour Divisions temporary rule outlines the employee count method to be used for private employers to determine if they must provide paid sick leave. All private employers with 500 employees at the time an employee would take leave must comply with EPSLA and EFMLEA provisions.
Employers should include the following employees in the headcount:
- all full time and part time employees
- employees on leave
- temp employees
- employees within the US or territories of the US
Employers should not include the following:
- independent contractors
- furloughed or terminated employees
Q. What does it mean that qualified sick leave wages are not subject to the employer portion of social security tax under the FFCRA payroll tax credit?
A. The payroll tax credit allows for a refundable payroll tax credit equal to any payments of the new required sick leave limited to 80 hours, or 10 days and $511 per day. Any payment from this pool of emergency paid sick leave will not be subject to the employer share of social security which allows the employer to immediately access these funds. It is our understanding that the updated Q2 941 will include instructions for how to report, track and account for the employer portion of social security related to emergency paid sick leave that does not need to be remitted to the IRS.
Q. Can the EE side of SS or Medicare be deferred for all EE SS and Medicare liabilities or only those pertaining to COVID-19 payments?
A. Section 2302 of the CARES Act which provides FICA payroll tax deferral only applies to the employers share of Social Security. The deferral is applicable to the entire portion of employer’s social security obligation and is not limited to deferral of the employers portion of social security for EPSLA or EFMLA payments. It does not apply to the employee’s share of Social Security tax, the employee or employer’s share of Medicare tax, or to the Additional Medicare tax imposed on employees with Medicare wages in excess of 200K. In addition, filing deadlines for reporting the employee and employer portions of Social Security and Medicare taxes have not been delayed by the Act.
Q. Is the FFCRA refundable credit made of: 1) required paid sick leave within established limitation + 2) employer share of Medicare tax imposed on those wages + 3) allocable cost of qualified health care expenses (is this the employer portion of the cost of offered medical coverage?). Is there anything else to add? Since I found IRS FAQ on this matter that says “the Eligible Employer is not subject to the employer portion of the social security tax imposed on those wages”. Since that is calculated to be paid in Greenshades through the tax service, do we need to add to the credit we are claiming also 6.2% on those wages?
A. The three types of leave under the COVID-19 Acts are:
a. Emergency Paid Sick Leave Act (EPDSLA) – Must have less than 500 employees, leave must be the result of a government quarantine mandate, healthcare worker recommended employee quarantine, employee is experiencing symptoms.
i. Wages covered for 10 days or 80 hours (if full-time) at regular rate of pay
1. Wages for employees directly affected by COVID-19.
2. Wages are capped at $511.00/day for up to 10 days or a total of $5,110.00
3. Wages include the cost of the employer provided health insurance to the affected employee.
4. Wages also include the employer’s share of Medicare costs (1.45%)
ii. Employee is caring for someone with Coronavirus or child’s childcare/school has been closed.
1. Wages for employees not directly affected by COVID-19.
2. Pay is calculated at 2/3 of wages and are capped at $200.00/day for up to 10 days or a total of $2,000.00
3. Wages include the cost of the employer provided health insurance to the affected employee.
4. Wages also include the employer’s share of Medicare costs (1.45%)
b. Emergency Family Medical Leave Act (EFMLA) – First 10 days are not paid through the EFMLA but can be paid using employee’s PTO.
i. Pay is calculated at least 2/3 of wages and are capped at $200.00/day or $2,000
ii. Length of time is up to 10 weeks, not to go beyond December 31, 2020
iii. Is combined with FMLA used earlier in the year up to the maximum amount of 12 weeks.
iv. Includes the cost to maintain employer provided health insurance to the employee and the employer’s share of Medicare.
v. If the employer agrees to, the EFMLA can be combined with Employee’s available PTO – but this will not be included for the refundable credit.
c. Employee Retention Credit – Employer must meet the criteria to be qualified for this credit.
i. The qualifiers are:
1. Either the business has had to fully or partially suspend operation because of governmental orders due to COVID-19; or
2. They experienced more than 50% decline in gross receipts as compared to the same quarter a year ago.
ii. This credit is optional.
iii. Additionally, if the business averages 100 or less full-time employees in 2019, all wages (not just full-time employees) are qualified during the period March 12, 2020 through December 31, 2020.
iv. If the business averages over 100 full-time employees, only the qualified wages due to the suspension of operations or decline in gross receipts will be allowed for the credit.
v. Wages can include the costs to retain the healthcare coverage for the affected employee and the employer’s share of Medicare cost.
vi. This credit’s eligibility is determined each quarter. The period is March 12, 2020, up to December 31, 2020
Greenshades will be calculating your actual liability and it will be up to the employer to determine how they will receive the refundable credit.
Q. How will the 3 new expected fields relate to FFCRA credit work? Is it total qualified sick leave and total qualified family leave just for the eligible wages and the field “total employee retention credit” the summation of the two above + the other portion of the credit that we need to manually add here (allocable cost of insurance and employer Medicare portion)? Anything else?
A. Each field is separate from the other. The wages used for one type of leave cannot be used for another type of leave. Each of the 3 types outlined above are listed separately on the 7200, Advance Payment of Employer Credits Due to COVID-19.
Q. If for whatever reason we are not in time to calculate from a weekly payroll the credits associated to FFCRA, can we take the credit in the following weekly payroll (credit previous week+ credit current week) within the same quarter as long as we have enough Federal Tax Liability to apply it to?
A. The IRS has created a new form 7200:
This form allows employers to capture the credit per payroll if necessary. The form adds the amounts on lines 1, 2, 3, 5, and 6 from paycheck to paycheck creating a rolling net credit amount. Factoring in a prior and current payroll in will allow you to capture any advance that you may have been entitled to. The final payroll will be calculated with the quarterly 941 form. The IRS anticipates the updated version to be available around June 30, 2020.
Q. In case of FFCRA credit amount not being material each week and having anyway a tracking system in place, I understand that there is the option to claim the FFCRA refundable credit all in one time quarterly when filing the 941 instead of dealing with small credit amounts every week by shortening the tax deposits. Can do that? Since we use Greenshades tax service to file and pay can we fully do that by not taking the credit every week when we pay taxes (so we would not be using the expected 3 new fields) and claim it directly with the 941?
A. Check back with your Greenshades support representative, we are planning having available soon where we will be requesting from the employer the amounts for lines 1, 2, and 3 on the 7200 form, which will create the refundable credit that you will retain.