This article outlines paid leave under the Emergency Paid Sick Leave Act as well as paid leave under the Emergency Family and Medical Leave Expansion Act.
Who is considered an eligible employer?
Businesses and tax-exempt organizations with fewer than 500 employees are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the April 1st and December 31, 2020.
Exemption for small businesses
Small businesses, including religious or nonprofit organizations, with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue.
A small business may claim this exemption if an authorized officer of the business has determined that:
- The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
- The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
- There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.
Please note that this exemption does not apply to the Emergency Paid Sick Leave in which the employee is unable to work due to quarantine.
The Department of Labor (DOL) encourages employers and employees to collaborate to reach the best solution for maintaining the business and ensuring employee safety.
How is the amount of qualified leave calculated?
Employees would get a two week period of leave (or ten days) equal to the number of hours they work on average over a two-week period (including part-time employees). The maximum amount of leave hours a single employee can take during the two week period is 80 hours. Some employees may be eligible for an expanded ten week leave covered under the Family and Medical Expansion Leave Act.
The leave must be provided in instances where an employee:
- Is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
- Is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- Is caring for an individual who is subject to a quarantine order or has been advised to self-quarantine.
- Is caring for a son or daughter and the child’s school or place of care has been closed, or the child care provider is unavailable due to COVID-19 precautions.
- Is experiencing any other substantially similar condition.
Paid sick leave is to be calculated based on the greater amount of the employee’s regular rate of pay or the applicable minimum wage rate. There is a two-tiered pay rate:
- If the employee’s sick leave is for reasons 1, 2, or 3 above, the pay is calculated based on the full amount the employee would have been paid (capped at $511 per day).
- If the leave is for items 4, 5, or 6 above, the pay rate is two-thirds of the full pay amount (capped at $200 per day).
Self-employed individuals are also eligible for paid sick leave, but the payment will be made through a tax credit.
How do I claim sick leave as the credit?
Eligible employers who pay qualifying sick or child care leave will be able to retain an amount of their federal payroll taxes equal to the amount of qualifying sick and/or child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include:
- Federal Income Tax Withheld
- ER and EE Portion of Social Security Tax
- ER and EE Portion of Medicare Tax
The Credit is to be applied on taxes for all employees, whether or not they are receiving Paid Leave.
If there is not enough payroll taxes to be offset, a refund for the unclaimed amount will be requested when filing Form 941, Employer's Quarterly Federal Tax Return or you can complete Form 7200 Advance Payment of Employer Credits.
Note: Paid Leave wages are not subject to the employer portion of Social Security as outlined by the Internal Revenue Service (IRS) in their FAQ.
Tax Credit Calculation Examples
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
$5,000 Sick Leave Paid
$8,000 Fed ER & EE Taxes (SS, Medi, FIT)
= $3,000 Tax Due
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000. Accelerated payments are expected to be paid out directly by the IRS to the Employer. The IRS expects to process these requests in two weeks or less.
$10,000 Sick Leave Paid
$8,000 Fed ER & EE Taxes (SS, Medi, FIT)
= $2,000 Accelerate Payment due from IRS to the ER
*Note, unused credits do not roll forward quarter to quarter.
How do I enter the Emergency Paid Leave in Wave?
You will be able to enter Paid Sick Leave for both hourly and salaried employees within Timesheets. To do so, go to to the Payroll tab on the left-hand side menu:
- Click Timesheets
- You will see your hourly employees first, and will be able to to toggle to your salaried employees by clicking Salaried employees
- Click the arrow next the name of your employee
- In the bottom two rows, you will see COVID-19 Sick Leave and COVID-19 Family & Medical Leave. Depending on the reason for your employees' leave, you will be able to enter either sick leave hours or Family and Medical Leave hours per employee (one employee can not receive both paid leaves at the same time)
- Click Save
When you review your next payroll, these amounts will appear as "COVID - Sick Leave" and "COVID-19 Family & Medical Leave" under the Tax Credits section on your Payroll Summary.
Note that amounts entered into the Extended Leave will fall into the "COVID-19 Family & Medical Leave" tax credit line.
Your employees will also see their paid leave wages listed on their Pay Statements.
You will be able to enter paid leave for employees until you reach the maximum amount as described earlier.
Wave is continuing to work hard to make this feature even better. This article will be updated as the feature is improved.
How do I calculate the average number of hours for a part-time employee?
A part-time employee is entitled to leave for their average number of hours they would normally work within a two-week period. There are a few different scenarios outlined in the Department of Labor's FAQ to help you determine the average number of hours for these employees:
- Calculate hours of leave based on the number of hours the employee is normally scheduled to work.
- If the normal hours scheduled are unknown, or if your employee’s schedule varies, you may use a six-month average to calculate the average daily hours. Such a part-time employee may take paid sick leave for this number of hours per day for up to a two-week period, and may take expanded family and medical leave for the same number of hours per day up to ten weeks after that.
- If your employee has not been employed for at least six months, use the number of hours that you and your employee agreed that the employee would work upon hiring.
- If there is no such agreement, you may calculate the appropriate number of hours of leave based on the average hours per day the employee was scheduled to work over the entire term of his or her employment.
Note that your employee must have been employed with you for 30 calendar days or more prior to the first day of leave in order to qualify for the expanded family and medical leave. Such a part-time employee may take paid sick leave for their average number of hours per day for up to a two-week period, and may take expanded family and medical leave for the same number of hours per day for up to ten weeks after that.
Where can I view the credit amount I've claimed so far in Wave?
You will be able to view your accumulating credit amount by going to the Payroll menu on the left-hand side and clicking COVID-19.
On this page, you will be able to see the claimed amount per credit as well as the remaining balance. You will also be able to see leave wages reflected in your Payroll Wage & Tax Report which is easily accessed from the right hand side of the COVID-19 page.
Please note that credit amounts for Family & Medical Leave and Extended Family & Medical Leave are included in the same credit amount. This is because both of these leaves are grouped together when reporting.
How are the tax credits bookkept within Wave?
Check out our step-by-step guide on how to bookkeep your tax credits:
Employers will report their total qualified leave wages and the related credits for each quarter on their federal employment tax returns, usually Form 941, Employer's Quarterly Federal Tax Return. The IRS released an updated Form 941 for quarter 3 onward.
Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.