Rather than create a new mandate for paid sick and family leave, the American Rescue Plan Act of 2021 expanded the availability of payroll tax credits for covered employers who voluntarily choose to continue offering the Families First Coronavirus Response Act (FFCRA) – style paid sick and paid family leave.
Paid family and sick leave outlined in the FFCRA required employers with fewer than 500 employees to provide two weeks (up to 80 hours) of Emergency Paid Sick Leave and up to 10 weeks of paid Expanded Family and Medical Leave for various COVID-19-related reasons.
According to the law, covered employers had to provide the leave benefits from April 1, 2020 through December 31, 2020. The requirement also provided qualified employers with a dollar-to-dollar tax credit for the paid leave.
While the mandate first expired on the last day of 2020, the Consolidated Appropriations Act of 2021 extended the payroll tax credit to employers who voluntarily provided the sick and family leave benefit for the first three months of 2021. Recently, the American Rescue Plan Act (ARPA) again extended the payroll tax credits through Sept. 30, 2021, for those eligible employers who, again voluntarily, decide to extend the leave benefits.
The ARPA also made changes to the tax credit, including expanding qualifying reasons employees can take the leave and additional reasons for which the tax credit can be claimed. The reasons include: time off to get the COVID vaccine; time off to recover from any illness or injury related to the vaccine; and time off needed to get a COVID test or await a medical diagnosis of the virus if the employee has been exposed to COVID-19 or the employer has asked the employee to be tested.
Also expanded was the limit on the tax credit for paid family leave. The 10-week maximum period for paid family leave credits was extended to 12 weeks. The two weeks of sick leave was reset– allowing employers to claim a credit for 10 days paid to an employee even if they had previously been paid two weeks of leave. The limit on the tax credit for paid family leave wages has been increased to up to $200 per day and up from $10,000 per employee to $12,000.
Given some of the law’s complexities and ongoing changes to the tax credits, it’s advisable to contact one of our tax professionals for guidance and information. To make an appointment or learn more, please contact our office. We are happy to help!