The COVID-19 pandemic has put a strain on the worldwide economy. In response, many governments have passed COVID-19 stimulus and paid leave legislation. In the United States, that has arrived in the form of the Coronavirus Aid, relief, and Economic Security Act (CARES Act) and the Families First Coronavirus Response Act (FFCRA).
We’ll examine the impact of these two pieces of legislation on US employees and employers, as well as provide a potentially important SAP Payroll custom rule to track COVID-19-related sick leave.
How will the COVID-19 Stimulus in the CARES act affect my 2020 taxes?
There are many elements of COVID-19 stimulus in the CARES act, but the most directly impactful for most Americans will be a one-time payment of up to $1,200 for individuals and up to $500 more for each dependent.
This stimulus will have no impact on your 2020 taxes because the law defined it as a “recovery rebate” payment. Technically, it is a refundable tax credit to off-set your 2020 income taxes. Usually, you cannot claim a credit until you file your taxes; however, due to the severity of the COVID-19 national crisis, the government is giving qualified citizens the “credit” in the form of a payment.
Will the COVID-19 stimulus payment increase my taxes in payroll checks?
As described above, these payments will not affect your taxable income. Therefore, you do not need to change your withholdings due to the payment.
COVID-19 Leave Benefits in the FFCRA
Beyond economic stimulus, the US government has also passed the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act, both part of the Families First Coronavirus Response Act (FFCRA) are new protections and relief for employees affected by COVID-19.
Per the Department of Labor:
The Families First Coronavirus Response Act (FFCRA) requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. The Department of Labor’s Wage and Hour Division (WHD) administers and enforces the new law’s paid leave requirements. These provisions will apply from the effective date through December 31, 2020.
Generally, the Act provides that employees of covered employers are eligible for:
- Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
- Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor; and
- Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.
Which Employers are Covered?
The paid sick leave and expanded family and medical leave provisions of the FFCRA apply to certain public employers, and private employers with fewer than 500 employees.[1] Most employees of the federal government are covered by Title II of the Family and Medical Leave Act, which was not amended by this act, and are therefore not covered by the expanded family and medical leave provisions of the FFCRA. However, federal employees covered by Title II of the Family and Medical Leave Act are covered by the paid sick leave provision.
Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
Which Employees are Covered?
All employees of covered employers are eligible for two weeks of paid sick time for specified reasons related to COVID-19. Employees employed for at least 30 days are eligible for up to an additional 10 weeks of paid family leave to care for a child under certain circumstances related to COVID-19.[2]
Notice: Where leave is foreseeable, an employee should provide notice of leave to the employer as is practicable. After the first workday of paid sick time, an employer may require employees to follow reasonable notice procedures in order to continue receiving paid sick time.
Qualifying Reasons for Leave
Under the FFCRA, an employee qualifies for paid sick time if the employee is unable to work (or unable to telework) due to a need for leave because the 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 related to COVID-19;
- is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
- is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
- is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19; or
- is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
Under the FFCRA, an employee qualifies for expanded family leave if the employee is caring for a child whose school or place of care is closed (or child care provider is unavailable) for reasons related to COVID-19.
Duration of Leave
For reasons (1)-(4) and (6): A full-time employee is eligible for 80 hours of leave, and a part-time employee is eligible for the number of hours of leave that the employee works on average over a two-week period.
For reason (5): A full-time employee is eligible for up to 12 weeks of leave (two weeks of paid sick leave followed by up to 10 weeks of paid expanded family & medical leave) at 40 hours a week, and a part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period.
Calculation of Pay
For leave reasons (1), (2), or (3): employees taking leave are entitled to pay at either their regular rate or the applicable minimum wage, whichever is higher, up to $511 per day and $5,110 in the aggregate (over a 2-week period).
For leave reasons (4) or (6): employees taking leave are entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period).
For leave reason (5): employees taking leave are entitled to pay at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $12,000 in the aggregate (over a 12-week period).
SAP Payroll Considerations for Additional COVID-19 Stimulus and Related Leave
You may need to create some custom rules in your SAP Payroll system in order to track any special leave related to COVID-19 stimulus and leave.
In order to track sick leave, you should consider the follow steps:
- Create two (2) new Wage Types: a.
- FFCRA sick leave (e.g. WT 9990)
-
- FFCRA paid sick leave family (e.g. WT 9991)
- Create Custom Rule to determine if the per day minimum payment is reached:
-
- If WT 9990 (FFCRA Sick Leave) < 551
-
- AMT = 551
-
- ADDWT *
Else
-
- ADDWT *
End-if
-
- If WT 9991 (FFCRA paid Sick Leave Family) < 551
-
- AMT = 200
-
- ADDWT *
Else
-
- ADDWT *
End-if
- Insert the new rule after the PIT X015, in subschema, UT00 (or your copy of it).
- Using the wage type reporter, create a variant for these earnings to provide proof when reimbursement is necessary from the IRS.
More Information on COVID-19 Stimulus and Leave
For more information on how the COVID-19 stimulus impacts you and your business, check out this release from the IRS regarding paid sick leave, employer reimbursement, small business protection, and compliance. The Department of Labor has also offered a useful FAQ sheet for the FFCRA.
