a gingerbread man in a mask and a medical phonendoscope with the inscription paid sick leave on a blue background. FMLA Family Medical Leave Act
Almost exactly a year ago, Congress passed the CARES Act to provide relief for Americans during the Coronavirus pandemic. This $2.2 Trillion stimulus package provided billions to state and local governments, a Paycheck Protection Program, direct payments to individuals, and an increase in unemployment benefits. In addition to the CARES Act, Congress also passed the FFCRA (Families First Coronavirus Response Act), which contained special provisions for paid sick leave in regards to the coronavirus.
As a business owner, you are likely wondering what this means for you, your business, and your employees. In this guide, we’ll be breaking down what paid sick leave for the coronavirus means for you, how it works, and how this will affect you when tax season comes along.
What Qualifies an Employee for Paid Sick Leave?
Obviously, this law doesn’t cover basic sick leave and is geared specifically towards the coronavirus. In short, paid sick leave for coronavirus is applicable to employees who are unable to work due to federal, state, or local lockdowns. There are a number of rules that apply here, so we’ll go over a number of them right now.
- If an employee tests positive for coronavirus, they qualify for paid sick leave, even if they’re asymptomatic.
- If an employee is asymptomatic but is being advised by a health care professional to quarantine, then they qualify.
- If an employee is experiencing COVID-19 symptoms and is awaiting a diagnosis (a positive test, for example), then they qualify.
- If an employee has to care for someone under lockdown orders, like a child (especially if they’re young and the schools are closed) or an elderly person, then they qualify. The person being cared for must also be subject to quarantine or shelter-in-place orders.
- If an employee is experiencing substantially similar conditions to COVID-19 as specified by the Secretary of Health, then they qualify. However, please note that at the time of publication, no such conditions have been identified.
It’s strongly advisable to take all the necessary precautions you need, but the unfortunate reality is that sometimes, this won’t be enough. Be careful, take care of yourself and your employees, but be prepared for the worst.
How Much do I Have to Pay for Paid Sick Leave?
This number will vary, but there are specific guidelines in place in regards to how much you need to pay your employees when they take paid sick leave due to COVID-19.
Full-time employees (40 hours a week) will be covered for a two-week period of up to 80 hours. For example, if one of your employees makes $10 an hour, they will receive $800 of paid sick leave—two weeks’ worth of their time.
Part-time employees will also receive two weeks’ worth of pay. However, since their hours often vary and are not set, they will receive an amount based on the average number of hours they work over two given weeks. Much like the aforementioned full-time employee, let’s say one of your part-time employees makes $10 an hour. If the average number of hours they work over two weeks evens out to 29, then they will receive $290.
Different businesses have different needs and widely varying salaries. With this in mind, there are many employees who might make far more than $10 an hour. With this in mind, please note that the limit under the FFCRA (we’ll discuss that “limit” later) is $511 per day, up to $5,110 overall.
Are There Exceptions? What if I Can’t Afford Paid Sick Leave?
As it happens, there are exceptions for paid sick leave for businesses under very specific circumstances. The most notable examples are:
- If you have work for your employees to do. This may cause some to scratch their heads, but the explanation is simpler than it may seem. Basically, if you shut down your business (or were forced to shut down by legal restrictions), you don’t have to pay sick leave, since there is no work for your employees to perform. However, if you’re still operating your business (hopefully with the necessary precautions in place), you need your employees to perform their tasks, they will therefore qualify if they need to take sick leave. This also applies if you’re open and your employees can work from home. In reality, this qualifier doesn’t make a difference for most businesses, but the information is still good to know going forward.
- If your business has fewer than 50 employees. The law applies to businesses with fewer than 500 employees, but particularly small businesses with less than 50 employees, they are not required by law to pay for sick leave. This is likely a relief to read if you’re a small business owner.
- If you cannot pay sick leave without jeopardizing your business as a going concern. In particular, this exception applies when “such leave would cause employers’ expenses and financial obligations to exceed available business revenue and cause small employers to cease operations at a minimal capacity at the absence of the employer” being able to prove that the “employee requesting such leave will pose a substantial risk to the financial health of the business,” or if the employer can’t find a replacement employee to do the work. Essentially, if you literally can’t pay sick leave without your business going under, you’re off the hook. However, you MUST have documentation to prove this should the Department of Labor ask you for proof.
Where Does This Money Come From? Do I Get it Back?
If you’re worried about having to pay too much sick leave for coronavirus, don’t be—when tax season comes by, you’ll be getting the money back! As an employer, when you fill out your 941 forms, you’ll be getting a dollar-for-dollar credit on your payroll taxes. The aforementioned $5,110, for example, is all coming back to you, so don’t fret if you have to pay that much. Keep in mind that this is retroactive—the law was passed in March 2020, so if you paid sick leave for coronavirus before then, you can still apply for that tax credit.
Regardless, these tax laws can be complicated, so if you’re struggling to make sense of it, don’t hesitate to hire a professional CPA to help you along the way. In summary, if one of your employees has to take sick leave due to coronavirus, you have to pay for it (with a few exceptions). However, you will be getting that money back in the form of payroll tax credits up to $5,110. Be mindful, be safe, and like I always say: “Let’s make this our most profitable year ever!”