New emergency paid sick leave and tax credits

What is emergency paid sick leave?

Businesses with under 500 employees are required to provide emergency paid sick leave. Employees can use emergency paid sick leave for the following due to COVID-19:

  • subject to a federal, state or local isolation/quarantine order

  • advised by healthcare provider to self-quarantine

  • experiencing symptoms and seeking medical care

  • care for a family member who is under a federal/state/local order or recommendation by a healthcare provider to quarantine/isolate

  • care for a child whose school/place of care has been closed due to COVID-19

  • experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services

Emergency paid sick leave becomes effective on April 2, 2020 and there is no waiting period for new employees to use it.

How should employers pay employees taking emergency sick leave?

Employees taking leave because they are subject to a federal/state/local isolation or quarantine order, are advised by a healthcare provider to self-quarantine, or are seeking medical care related to COVID-19 are entitled to 100% of their regular wages up to $511/day, for up to 80 hours for full-time employees or the average number of hours worked over a two-week period for part-time employees.

Employees taking leave to care for a family member who is under a federal/state/local order or was advised by a healthcare provider to quarantine, or employees taking leave to care for a child whose school/place of care has been closed, get two-thirds of their regular wages up to $200/day, for up to 80 hours for full-time employees or the average number of hours worked over a two-week period for part-time employees.

Employees who make more than the limits listed above can be paid their full wages if the employer is able to cover these costs, but employers will only receive a tax credit up to those limits.

How does the employer tax credit work?

If your employees take emergency paid sick leave, you can receive a tax credit up to the limits listed above to cover the wages you paid them. This credit covers 80 hours of paid sick leave for full-time employees, or the average number of hours worked over a two-week period for part-time employees.

The credit will be applied to an employer’s Social Security taxes (this reduces the federal tax payments Gusto makes on your behalf).

  • For time an employee takes for a federal/state/local isolation or quarantine order, a recommendation by a healthcare provider to self-quarantine, or to seek medical care related to COVID-19, the credit is capped at $511 per day and $5,110 total per employee.

  • For time taken to care for a family member who is under a federal/state/local order or was advised by a healthcare provider to quarantine, or time taken to care for a child whose school/place of care has been closed, the credit is capped at $200 per day and $2,000 total per employee.

What should I do now if an employee needs leave?

If you have an employee who needs emergency leave due to COVID-19, you are free to grant them this type of leave before the law goes into effect on April 2, 2020. Employers will be required to grant this type of leave starting April 2, 2020

Note that any sick leave you provide before April 2, 2020 cannot later be used towards the tax credit or counted against the amount of paid sick leave you must provide. We’re working to support emergency sick leave in Gusto ASAP. In the interim, you’ll need to keep track of the total hours of emergency leave taken by each employee outside of Gusto. We’ll update this page when support is available in Gusto.

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