With the passage of the Families First Coronavirus Response Act (“FFCRA”) last year, public employers were specifically excluded from taxing any payroll tax credits in association with the mandatory benefits paid to their employees under the Emergency Family and Medical Leave Expansion Act and Emergency Paid Sick Leave Act (both passed under the FFCRA). Although the mandated benefits under the FFCRA expired December 31, 2020, the Consolidated Appropriations Act of 2021 extended the payroll tax credits available under the FFCRA through March 31, 2021 for employers who voluntarily provided leave to employees whose leave entitlements had not been fully exhausted by December 31, 2020.
With the passage of the American Rescue Plan Act (“ARPA”), the payroll tax credits have yet again been extended for the period from April 1, 2021 through September 30, 2021 for employers who continue to voluntarily provide the previously mandated benefits under FFCRA. However, unlike under the FFCRA, the payroll tax credits are now available to local government employers. ARPA also expanded the circumstances in which the payroll tax credits are available both under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act.
Expanded Benefits Eligible for Payroll Tax Credits under Emergency Paid Sick Leave Act
- Employee is seeking or awaiting results of a diagnostic test for or a medical diagnosis of COVID-19 after an exposure at the employer’s request;
- Employee is obtaining a COVID-19 vaccine; or
- Employee is recovering from any injury, disability, illness or condition related to a COVID-19 vaccine.
There is a new allotment of up to 80 hours per employee of qualifying paid sick leave available for the 2021 payroll tax credits. The payroll tax credit an employer can receive for paid sick leave is based on the employee’s regular rate of pay, up to a cap of $511 per day, if the need is related to immunization or testing or because of the employee’s own symptoms, quarantine or isolation, but, if for other reasons, the amount of the payroll tax credit is limited to 2/3rds of the employee’s regular rate of pay capped at $200 per day.
Expanded Benefits Eligible for Payroll Tax Credits under Emergency Family and Medical Leave Expansion Act
- Expands the reasons to take family and medical leave to include the qualifying reasons to take paid sick leave, including those listed above.
The payroll tax credit cap is increased from $10,000 to $12,000 per employee. ARPA eliminates the requirement that the first ten (10) days of expanded family and medical leave is unpaid. The available payroll tax credit per employee is still limited to 2/3rd the employee’s regular rate of pay up to a maximum of $200 per day (does not provide the $511 per diem cap as under the Emergency Paid Sick Leave Act).
For any employer to qualify for the payroll tax credits under ARPA, the employer must comply with the FFCRA’s anti-retaliation provisions, and now must not discriminate in favor of an employer’s highly compensated employees, full-time employees or on the basis of tenure of employment.
Local government employers should assess whether to voluntarily offer these non-mandatory benefits, as, at least for the period from April 1, 2021 through September 30, 2021, they may qualify for payroll tax credits in association with offering these non-mandatory benefits.