March 19, 2020
The federal government’s coronavirus response package (H.R. 6201) requires employers to provide up to two weeks of paid sick leave for any employees missing work due to COVID-19, and up to 12 weeks paid sick leave for employees absent because a child’s school or daycare facility has closed due to the virus. Employees absent on 2-week leave will earn their regular pay (up to $511 per day), while employees absent under the 12-week leave will earn two-thirds their regular pay (up to $200 per day). Employers who are healthcare providers or emergency responders may exempt themselves from these requirements.
The Act applies to employers under 500 total employees. Undoubtedly, this federally mandated paid sick leave program will place a considerable financial strain on the nation’s small businesses. However, the Act does provide a reimbursement for these additional expenditures in the form of a payroll tax credit equal to the total amount of the qualified sick leave wages paid by the employer.
To be qualified, the credits themselves are capped at the same $511/$200 per day maximums, but employers can increase the credit amount for qualified health plan expenses properly allocable to employees during the paid sick leave period. Fortunately, the Act permits any excess credit amounts to be fully refundable to the employer. Self-employed individuals are also eligible for the credit for any amounts of qualified sick leave attributed to themselves, which, in general, means that self-employed individuals will receive a payroll tax credit equal to their average 2-weeks earnings.
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