How the Government Will Reimburse COVID-related Paid Sick Leave

Posted by PRemployer on April 23, 2020

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How Reimbursement Will Occur

Division G, Section 7001 and 7003 of HR 6021 ("Families First Coronavirus Response Act") clarifies how reimbursement will occur.

Payroll Credits for Required Paid Sick Leave (Section 7001) – Eligible Employees Are Provided Up To 80 Hours of Paid Sick Leave

Under Section 7001 of HR 6021:

  • Eligible employers (less than 500 employees) can receive a tax credit up to 100% of the amount covered in paid sick leave for employees impacted by COVID-19
  • The Paid Sick Leave for each eligible employee will depend upon the reason for the leave. If for qualifying reasons 1-3 listed in the FFCRA, paid sick leave will be at 100% of the employees’ rate of pay, not to exceed $511 per day / $5110 in the aggregate per employee. If sick leave is for reasons 4-6, paid sick leave will be at 2/3 the employees’ rate of pay, not to exceed $200 / $2000 in the aggregate per employee. Also, part-time employees, defined as working less than 40 hours per week, will have sick time available on a pro-rated basis, equal to the number of hours they average over a two-week period 
  • Reimbursement for Paid Sick Leave through tax credits will not exceed 80 Hours, and is effective until December 31, 2020.
  • Employees may only receive the Sick Leave and/or the FMLA payments if they meet the eligibility criteria stipulated in the regulations.

Many employers also wonder what will happen if the amount they pay out in sick leave exceeds the amount they should expect to pay in payroll taxes. Under these terms, this excess will be treated as an overpayment of taxes, and employers will receive a refund check for that additional amount. 

Under the terms of this Act, employers can receive this reimbursement for payment of sick leave to their employees impacted by COVID-19. The "denial of double benefit" clause, however, indicates that the employer cannot receive double credit for that payment. The wages taken into account for that benefit will be added to the employer's income for the year, since the employer did receive reimbursement. If the employer claims a section 45S deduction for those wages, the employer cannot claim reimbursement under this act. 

Payroll Credits for Required Paid Family Leave (Section 7003) – Eligible Employees Provided Up To Twelve (12) Weeks of Paid Leave

Employees who have dependent children who are home due to the closing of schools and/or day care will be eligible for up to 12 weeks of Expanded Family Medical Leave. Employees on EFMLA will receive 2/3 their normal rate of pay for the number of hours normally worked each week for up to 12 total weeks, not to exceed $200 per day / $12,000 aggregate. The first two (2) weeks of EFMLA are unpaid, and the employee can opt to cover those two weeks with Paid Sick Leave, Company provided PTO, or take it unpaid. Employers will be eligible for 100% reimbursement of the expenses employers incurred when offering the paid EFMLA through the same tax credit process.  PAID EFMLA IS ONLY AVAILABLE TO EMPLOYEES FOR PURPOSES OF CARING FOR A DEPENDENT CHILD AT HOME DUE TO SCHOOL AND/OR DAY CARE CLOSINGS DUE TO COVID-19. This credit is limited to specific employment taxes, as well as the expense for employer provided health care premiums. Employers can receive a refund in the amount of the excess paid for employee sick leave under the terms of this plan. 

PRemployer will continue to keep our readers up to date with the latest on how COVID-19 and the government regulations assigned to help combat it and offer relief to employees will benefit their workplaces. Do you need direct help with claiming payroll tax credits? Contact PRemployer today. 

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