Emergency Paid Sick Leave Act
Every employee needs time off. Workers also need extensive sick days and paid leaves for themselves, and their dependents. This is common across the industrial spectrum, especially in today’s pandemic situation. Employers are aware that paid leaves are necessary to protect the health of their employees, the employees’ family and the community too. The federal and state governments frequently announce new and improved plans to provide paid sick leaves to employees across the country.
Overview of Emergency Paid Sick Leave Act
In March 2020, in the midst of the pandemic, Congress passed the Families First Coronavirus Response Act (FFCRA). Under this, all private-sector employees were eligible for a maximum of 10 paid sick days as well as around 12 weeks of paid family and medical leave. This was regarded as an important step to ensure low-wage earners had ample access to paid sick leaves during the pandemic. The federal government also covered the employers by providing businesses with tax credits if their employers used their extended paid sick leaves.
This act was valid till December 2020 and in the same month, Congress approved the Consolidated Appropriations Act 2021. Under this, the FFRCA was extended through March 2021. This initiative was meant for employers who choose to provide sick paid leaves under the act to their employees.
On 11th March 2021, the President signed the American Rescue Plan (ARP). Although this does not reinstate the fact that employers have to provide paid sick leaves, it does extend the tax credits promised to employers who choose to provide paid sick leaves to their employees under FFRCA.
Tax Credit Benefits for Employers under Emergency Paid Sick Leave Act
Let’s first take a look at the credits an employer can earn when they provide paid sick leave to their employees. Under the act, employers are eligible for tax credits that can cover costs for:
- Maximum 10 days of paid emergency sick leave for full-time employees, from 1st April 2021 to September 2021.
- Prorated paid emergency sick leave for part-time employees, according to the number of hours as per their average hours accumulated in a two-week period.
- Full wage replacement for employee self-care, with the maximum benefit of US$ 511 per day (up to a total of US$ 2,000 only).
- Two-thirds wage replacement when employees are looking after their dependent or family member whose school has been closed, or whose child care provider is not available, with maximum compensation of US$ 200 per day (up to a total of US$ 2,000 only).
Under the Emergency Paid Family and Medical Leave, an employer can claim tax credit to cover expenses incurred for:
- Maximum 12 weeks of paid emergency leave between 1st April 2021 up to September 2021 end.
- Two-thirds wage replacement for the duration of the leave period, with maximum compensation of US$ 200 per day (up to a total of US$ 12,000).
Uses of Tax Credits from Emergency Paid Sick Leave Act
The American Rescue Plan included the below-mentioned factors to provide benefits to employers under the American Rescue Plan:
- When the employee has to complete government-mandated isolation or quarantine order related to COVID-19 infection,
- When an employee’s health provider advises self-isolation due to the risk of COVID-19 infection,
- When an employee experiences COVID-19 symptoms and seeks medical diagnosis,
- When an employee is awaiting COVID-19 test results of diagnosis due to exposure, by requesting themselves or on their employer’s request,
- When employee needs leave to get the COVID-19 vaccine or recover from the vaccine’s probable side effects,
- When the employee is the care-giver for a child whose school is not in session or childcare places are not open anymore, or in case their childcare provider is not available from COVID-19 complications,
- When the employee is a care-giver to the individual in isolation/quarantine order from the federal government or healthcare provider
Credit Allowances under Emergency Paid Sick Leave Act
Here is a breakdown of the criteria under which employers receive benefits from their employee’s paid sick leaves:
- Employers with employees embarked on emergency paid sick leave and emergency paid medical and family leave can avail the tax credits for both types of paid sick leaves, however, the employee should not have taken the two types of leaves at the same time. Hence, tax credits can cover a maximum of 14 weeks of paid leave per employee, with employers eligible to claim tax credits worth US$ 12,000 in wages for each employee on leave.
- Employers who provide health insurance coverage to employees can also claim the tax credit and constantly provide healthcare coverage to employees during the duration of the leave.
- Employers shall be compensated with a refundable tax credit which counts against their payroll and these credits can also be advanced.
Eligibility Criteria and Availability of Tax Credits under Emergency Paid Sick Leave Act
Private-sector employers with less than 50 employees, state and local government employees and self-employed workers are eligible to receive tax credits under the Emergency Paid Sick Leave Act.
Employers can claim to leave credits for employee sick leaves registered between 1st April 2021 and 30th September 2021. The system resets on 1st April 2021, so employees who took their leaves last year can again apply for leaves. Under this act, the pending leaves cannot be taken after the end of September 2021.
The Act also guarantees many employees up to 600 hours of emergency paid leave.
As the country searched for ways to end the pandemic, the pursuit of economic recovery is a major issue. Paid leaves are extremely essential in such times as these can help rein in the progress of COVID-19 infections in the community. Paid sick leaves are becoming increasingly essential for low-wage frontline workers who are engaged in essential jobs. This act is an attempt to ensure that the country is providing permanent and comprehensive paid leaves for all workers.