Families First and CARES Acts: three payroll credits explained

Congress recently enacted three significant payroll tax credits in response to the COVID-19 pandemic. The Families First Coronavirus Response Act (FFCRA) (enacted March 18, 2020) contained two similar but distinct payroll credits: 1) the payroll credit for required paid sick leave (paid sick leave credit); and 2) the payroll credit for required paid family leave (FMLA credit). The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (enacted March 27, 2020) created a third credit, called the employee retention credit. All three credits are designed to help employers retain employees during the COVID-19 crisis.

The following outlines the qualifications and the calculation for each credit. Note that employers cannot “double dip” with respect to these credits. In other words, an employer cannot claim both the paid sick leave credit and the employee retention credit with respect to the same employee for the same wages. Moreover, employers that obtain a Payroll Protection Program loan, also created by the CARES Act, cannot also claim a payroll credit. Employers should consult with professionals to evaluate each option.

THE PAID SICK LEAVE CREDIT

Qualification

1. Do you have fewer than 500 employees?
   Note: The Secretary of Labor has exempted employers with fewer than 50 employees if the paid sick leave requirement would jeopardize the viability of the business as a going concern.
2. Are you required to pay an employee’s wages under the Paid Sick Leave Act? The Paid Sick Leave Act requires employers to pay 80 hours of wages to an employee if any one of the following applies:

• Employee experiences quarantine or self-isolation due to a COVID-19 diagnosis
• Employee has been advised by a healthcare professional to self-quarantine
• Employee experiences symptoms of COVID-19 and seeking medical diagnosis
• Employee is caring for an individual who is under a quarantine or self-isolation order
• Employee is caring for child because of school closure or unavailability of child care provider due to COVID-19

Calculation considerations

• Multiply employee’s total sick days (maximum 10) times regular rate of pay