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2021 FFCRA Leave for State and Local Government Employers

Tips for Determining if Participation is Right for Your Organization

credit-eligible FFCRA leave

At the start of the Coronavirus pandemic in early 2020, the Families First Coronavirus Response Act (FFCRA) came into effect to offer payroll tax credits to employers who provided mandated paid sick and emergency family leave to employees in need of time off for COVID-19 related reasons. Government employers were included in the leave mandates and were not required to pay the Employer share of Social Security tax on FFCRA wages, however they were specifically excluded from the fully refundable payroll credits on gross FFCRA pay.

The recent enactment of the American Rescue Plan Act (ARPA) extended the voluntary employer option to offer credit-eligible FFCRA leave and also made state and local governments eligible for the full tax credits, effective April 1 through September 30, 2021. For detailed information on FFCRA and ARPA for government employers, check out a recent article by The League of Minnesota Cities titled FFCRA Leave and the American Rescue Plan Act of 2021.

One key component of the American Rescue Plan Act, in addition to including State and Local government employers in the credit eligibility, is the fact that the extension of FFCRA paid leave is completely optional for employers. While the ability to choose is a benefit overall, it also requires employers to evaluate and determine whether offering extended FFCRA leave to their employees is the right decision for their specific organization.

In order to effectively weigh the options, there are some important points to consider:

  • One of the primary benefits of offering these leaves is that it provides employees with paid options for absences related to COVID-19. Not only does it provide paid time off for illnesses and caretaking needs due to COVID-19, it also now includes leave related to the COVID-19 vaccination and recovery, if needed. This paid time is, of course, a benefit to employees, and it provides for 100% employer reimbursement, via a payroll tax credit, for all FFCRA leave wages and taxes paid. Additionally, it can be a great way to incentivize employees to get the COVID-19 vaccine.
  • Similar to the above consideration, offering this paid leave gives employers a way to respond to COVID-19 related absences while claiming a full refund for these wages, via refundable payroll tax credits. If an organization chooses to opt out, it should understand that employees will still need time off for COVD-19 related circumstances so, if not offering FFCRA, they will need to have another plan to accommodate these absences. Some alternative options include requiring employees to use other employer paid-time-off balances or to take unpaid leave. It’s worth noting, however, that neither of these options are as appealing to employees as the additional FFCRA leave option.
  • For State and Local government employers, the full FFCRA payroll credit eligibility is new. Most employers will need additional training on how to properly document and track employee FFCRA eligibility, per employee and per request, for substantiation of the credit with the IRS. This additional administrative burden should be evaluated, both in terms of time and labor costs, prior to making a decision to ensure that employers are trained and have the administrative capacity to properly evaluate, document, and execute all incoming leave requests.
  • Opting into these leaves also requires the involvement of the Human Resources department to understand the details of FFCRA, communicate the benefits and requirements to leaders and employees, respond to questions from employees about qualifications and pay for leave, process the leave through payroll, and ensure the tax credits are received. All of these tasks require additional time and energy from existing employees, so it’s important to really consider who in the organization will do this work and if they have the time and resources to spend focusing on FFCRA.
  • Depending on your employee culture and history, employers should also at least consider the possibility of staffing challenges caused by the availability of additional paid leave. While every employer wants employees who are sick or quarantined to stay home, there is also the reality that FFCRA leave could be misused and result in serious staffing shortages in key departments.
  • You know your organization best. When deciding whether to offer additional FFCRA leaves, be sure to factor in your specific resources, needs, and staff capacity in weighing the pros and cons. Be very honest in examining where your organization is at right now and whether it has the ability to take on the work involved with offering, processing and documenting these leaves and their related tax credits. FFCRA leaves can provide a valuable benefit to employees, but it’s also crucial to evaluate the work involved before making the decision to opt in.

Considering whether to offer optional FFCRA leaves to employees is a challenging decision and involves a variety of factors. AEM Workforce Solutions has been helping public and private employers navigate FFCRA since early 2020, including educating employers on the details of FFCRA and helping them sort through the pros and cons to make the right decision for their specific organization. If you need help evaluating whether to offer FFCRA or want assistance and tools to ensure compliant internal FFCRA processes and recordkeeping, be sure to reach out to our team of experts at AEM Workforce Solutions at aemws@aemcpas.com.

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