Payroll Relief for Paying Employees Out of Work for COVID Reasons

As infection rates continue to increase, many business owners are facing issues with employees missing work for COVID related reasons. One form of relief can be the utilization of the “Emergency Paid Sick Leave Act” (EPSLA), which is a payroll tax credit for employers with fewer than 500 employees to provide paid sick leave to employees unable to work or telework after March 31, 2020, and before January 1, 2021, due to the below reasons:

  1. Is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  2. Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  3. Is experiencing symptoms of COVID-19 and seeking a medical diagnosis;
  4. Is caring for an individual subject to an order described in (1) or who has been advised as described in (2);
  5. Is caring for a child if the school or place of care has been closed, or the childcare provider is unavailable, due to COVID-19 precautions; or
  6. Is experiencing any other substantially similar condition specified by the U.S. Department of Health and Human Services.

There are limitations based on certain circumstances.

  • For employees qualifying under (1), (2), or (3) above, the amount of qualified sick leave wages is determined at the employee’s regular rate of pay, but the wages may not exceed $511 for any day (or portion of a day) for which the individual is paid sick leave.
  • For employees qualifying under (4), (5), or (6) above, the amount of qualified sick leave wages is determined at two-thirds the employee’s regular rate of pay, but the wages may not exceed $200 for any day (or portion of a day) for which the individual is paid sick leave.

The EPSLA also limits each individual to a maximum of up to 80 hours of paid sick leave for the year. Therefore, the maximum amount of paid sick leave wages for the year can’t exceed $5,110 for an employee for leave under (1), (2), or (3), and it can’t exceed $2,000 for an employee for leave under (4), (5), or (6).

In addition to the sick leave credit, there is also the “Emergency Family and Medical Leave Expansion Act”. For employees unable to work because of (5) above, employers may receive a refundable childcare leave credit. This credit is equal to two-thirds of the employee’s regular pay, capped at $200 per day or $10,000 in the aggregate for up to 10 weeks. Eligible employers are also entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Both credits can be taken but cannot utilize the same dollars.

If you want more information on employer credits or need help with tax preparation, contact our tax professionals at The Innovative CPA Group at 203-489-0612.  Or contact us online.