COVID-19 Resources

Payroll and Payroll Tax Strategies relative to the Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family Medical Leave Expansion Act (EFMLEA)

Written by Warren Averett and Donna B. Conte, CPA on March 26, 2020

The Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family Medical Leave Expansion Act (EFMLEA) apply to businesses with fewer than 500 employees. The EPSLA states that sick employees who are unable to work (including remotely) for reasons related to COVID-19 must be provided paid sick leave, regardless of how long they have been with their employer. The EFMLEA expands the employee qualifications for leave so that employees who have worked for their employer for at least 30 days can qualify if the employee is unable to work due to a need to care for a child under the age of 18 if their school or place of childcare has been closed or is unavailable due to a public health emergency related to COVID-19. We’ve detailed these provisions and qualifications here.

Access more resources designed to offer relevant insights for organizations navigating the COVID-19 pandemic on our Coronavirus Resource Page.

What Payroll Processors Should Know About the Provisions

Establishing Paycodes

Payroll processors should use a special paycode to capture time paid under these acts. A separate paycode for each category of leave pay should be used. A summary of these wages that are exempt from 6.2% employer match social security tax is provided here.

To utilize Hours/Earnings Codes for Families First Coronavirus Response Act, we recommend checking with your payroll platform provider for guidance.  These systems will accommodate tracking the leave and calculation of tax.  In the absence of codes provided by a payroll provider, we suggest using the following paycodes:

  • FF-PSL-EE (Families First Paid Sick Leave, Employee’s illness or reasons 1-3 outlined in the Act) or
  • FF-PSL-FAM (Families First Paid Sick Leave, Family member or reasons 4-6 outlined in the Act) or
  • FF-FMLA (Families First Expansion of FMLA).

COVID or COVID-19 should not be used as a paycode or on timecards for privacy reasons as these codes can show up on employee pay statements and other reports.

Managing Additional Required Documentation

Under the EPSLA, employees should provide employers with reasonable notice as to the reason for their absence. To assist you we have provided a form that your employees can complete and return to you to document the reason for their absence. Click here to download the COVID-19 Paid Leave Documentation Form.

For the EFMLEA, we have created a policy for employers to use as well as a sample Emergency FMLA request form. Click here to download the COVID-19 Emergency FMLA Request Form.

Warren Averett is continuing to monitor information as its released regarding these provisions and will keep you up to date with the latest guidance relative to the EPSLA and EFMLEA application.

Claiming the Payroll Tax Credit

The legislation allows you to reduce the payroll tax deposit by 100% of the amount of leave paid under these acts. This will provide instant relief and cash flow as an advantage over waiting to take the credits on the payroll tax filing. Employers in need can also use IRS Form 7200 to apply for an advance payment in excess of the payroll credit if the financial relief provided doesn’t cover the amount of leave already paid to employees.

The credits that are claimed on your IRS Form 941 will be refundable should they exceed taxes due during the period.

If you have questions about what qualifies for these provisions or how your business should respond to the COVID-19 crisis, please reach out to your Warren Averett advisor or connect with one of our team members here.

COVID-19 Resources

This article reflects our views at the time this article was written and should be used as reference only. We recommend that you talk to your Warren Averett advisor, or another business advisor, for the most current information or for guidance specific to your organization.

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