For several weeks, the media has been reporting on the Coronavirus (COVID-19) and the high number of individuals affected by the disease. Initially, reports centered on the high number of cases and deaths in Wuhan, China, and the measures taken to contain the virus. As it spread to Europe and the U.S., more attention has been given to the widespread impact of the virus. Important information about illness-related deaths, symptoms, testing processes, and even how to protect against it have been provided. The seriousness of the situation was increased when the World Health Organization (WHO) classified Coronavirus as a pandemic. This has prompted the House to introduce the Families First Coronavirus Response Act, which outlines several changes to paid sick leave policies impacting Texas companies. To help clients, prospects, and others understand the changes, Calvetti Ferguson has provided a summary of key modifications below.
New Paid Sick Time Rules
While the Act outlines several government initiatives and programs to help those impacted by the virus, it also requires companies to make immediate changes to paid sick time rules. These changes which are effective immediately, include:
- The requirement that all employers permit employees to gradually accrue seven days of paid sick leave and to provide 14 days immediately in the event of any public health emergency, which includes the current coronavirus crisis.
- Any paid sick time will be required to accrue immediately starting the day employment commences. An employee must be able to use this benefit, after the sixtieth calendar day, as it is earned. It’s important to note, with some exceptions, paid sick time will be required to roll over from one year to the next.
- Employers will also be required to offer an additional 14 days of sick leave available immediately at the beginning of a public health emergency, which includes the current coronavirus crisis. A paid sick day cannot include days when the employee has received any other kind of compensation including wages or accrued paid leave.
- Expansion of paid sick leave will also need to cover days when a child’s school is closed due to a public health emergency, when an employer is closed due to a public health emergency, or if the employee or family members is isolated due to a public health emergency.
- Requires the federal government to reimburse small businesses (defined as those with 50 or fewer employees) for the cost of providing the 14 days of additional paid sick leave used during a public health emergency.
- Offer construction workers the opportunity to receive sick pay based on the hours worked for multiple contractors.
- Family Leave Act changes to expand benefits to cover Coronavirus events. Any company with less than 500 employees is required to offer 12 weeks of job protected leave.
Tax Credits for Businesses
There are several proposed tax credits to help the self-employed and Texas businesses manage the additional costs of required benefit changes, these include:
Payroll Credit for Paid Sick Leave
This refundable tax credit is equal to 100% of qualified sick leaves wages paid the employer for each quarter. The credit can be taken against the employer portion of Social Security taxes due on required wages paid for emergency sick leave. For wages paid to full-time employees that obtain a diagnosis, hospital care, or are subject to isolation and take sick leave, the credit is limited to $511 per day. For amounts paid to employees caring for sick relatives or caring for a child whose school has been closed, the credit is limited to $200 per day.
Self Employed Individual Credit
There is also a 100% refundable tax credit available for qualified sick leave related to the diagnosis, care, and isolation related to Coronavirus. For those caring for an affected family member or caring for a child facing cancelled school, the credit is equal to 67% of qualified sick leave. This credit is available against federal income taxes and is refundable.
Payroll Credit for Required Family Leave
There is a 100% refundable tax credit of qualified family leave wages paid. The credit is designed to be used against the employer’s Social Security portion of payroll taxes. Qualified wages are those required to be paid in accordance with the Family Leave Act changes. The amount of wages considered for each employee is limited to $200 per day and capped at $10,000.
Self-Employed Credit for Family Leave
There is a refundable tax credit equal to 100% of qualified family leave equivalent for certain self-employed individuals. This includes those who would be entitled to receive pay under the Family Leave Act changes if they worked as a W-2 employee. The amount is capped at the lesser of $200 per day or the average self-employment income for the taxable year per day.
The changes outlined above are designed to allow those affected to have the time needed to recover without significant loss of pay. However, it also creates new challenges for Texas businesses required to manage extended absences and increased benefits cost. Since the Act has not been passed into law, it’s likely additional changes will be made. However, the current context provides insight into what businesses can expect.
Visit our COVID-19 Resources page for more information.
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