The business is not usual since the coronavirus outbreak. The U.S. business industry has changed drastically in the past few weeks due to the coronavirus outbreak, creating distress for businesses to close down or lay off employees. The U.S. Government has established measures to help safeguard businesses and residents whose financial and physical welfare are affected significantly by the COVID-19 crisis. The Congress passed the Families First Coronavirus Response Act (FFCRA), or HR 6201, that provides Americans different benefits including free COVID-19 testing, access to food, unemployment, and medical benefits, paid sick, family and medical leave for the employees. The Wage and Hour Division (WHD) of the U.S Department of Labor manages and administers the new law’s paid leave requirements and that apply from the effective date through December 31, 2020.

As your small business financial partner, it is our job to be on top of such legislation changes and development to help keep business owners informed. To make things easier for you, we’ve summarized key points of Families First Coronavirus Response Act that can affect your small business.

Emergency Family and Medical Leave Act (FMLA) Expansion

The emergency paid family provisions under the FFCRA amend the Emergency Family and Medical Leave Act (FMLA) and require employers (business owners) to provide employees with paid benefits.

Businesses with less than 500 employees are required to provide up to 12 weeks of paid FMLA to employees that are unable to work (or work remotely) because the employees have to care for their children (under 18 years of age) because the school has been closed, or the childcare provider is unavailable due to the coronavirus health emergency.

Any full-time or part-time employee is eligible to job-protected leave if he or she has been on the employer’s payroll for at least 30 days, before taking the leave.

Employees can substitute available paid leaves and the first two weeks may be unpaid. The employees are entitled to ten weeks of job-protected leave at two-thirds of their regular rate of pay after two weeks of unpaid leave. The paid leave is capped at $200 per day ($10,000 in total) for the full 10 weeks.

Exemptions

  • Any business with less than 50 employees are exempt from these provisions, provided the leave would jeopardize the viability of the business.
  • Businesses with less than 25 employees don’t have to reinstate an employee to their position after the leave. For businesses with more than 25 employees, reinstating employees to their positions is compulsory.
  • Aby business with less than 50 employees is exempt from civil actions brought by employees for violations regarding emergency paid FMLA.
  • Health care providers or emergency responders can exclude their employees from paid FMLA expansion.

Emergency Paid Sick Leave

The U.S. Department of Labor the provision for emergency paid sick leave for employees. For businesses with 50-500, the act requires them to provide two weeks of sick leave to all employees. Full-time employees (employed for at least 30 days) will receive full pay for two weeks, while part-time employees will receive pay equal to their average hours for two weeks.

An employee is eligible to fully paid sick leave if he/she is under federal, state or local quarantine or experiencing COVID-19 related illness. Under such circumstances, the amount is capped at $511/day ($5,110 total).

For employees caring for family members under quarantine or a child whose school is closed due to COVID-19 will receive two-thirds of their full pay for two weeks. Under such circumstances, the benefit is limited to $200/day ($2,000 total).

Note: Any paid leave provided before this law cannot be credited against the employee’s paid leave entitlement and hours cannot be carried over after Dec. 31.

Exemptions

  • Any business with less than 50 employees are exempt from these provisions, provided the leave would jeopardize the viability of the business.
  • The absence of an employee or employees involving a substantial risk to the financial health or operational capability of the small business for their expertise or responsibilities.

Refundable Tax Credits for Paid Sick Leave and FMLA

To help businesses compensate for the cost of providing Coronavirus-related leave associated with the act, the U.S. government is providing quarterly refundable tax credits. Employers will get reimbursement for all wages paid under the act as well as the amount a business may need to pay to maintain an employee’s health insurance coverage by increasing the employer’s tax credit.

The tax credits are applied against an employer’s Social Security taxes for the qualified sick and family leave wages paid out. If the tax credits don’t cover the employee payouts, the Treasury Department is authorized to help cover the rest with cash payouts. Moreover, the Treasury is also issuing regulations to waive penalties for businesses that don’t submit payroll taxes because they’re waiting for a refund under this new law. Business owners can use this form to request an expedited advance on their refund

According to the Treasury Department, a form will be available soon for small businesses to request an expedited advance on their refund. To get more details on these tax credits and other relief, visit Coronavirus Tax Relief on the IRS website.

The Bottom Line

With new legislations evolving, businesses have to be informed while making decisions and considering layoffs or staff changes, especially in the current health emergency. If the act applies to your small business, it’s time to get in compliance by determining the facets relevant to your business and work with your affected employees. If your employees are claiming benefits through the FFCRA, make sure you have proper documentation to file for your own tax credits.

It might take some time to receive your tax credits because of so many affected businesses. Getting a short-term business loan can help fill the cashflow gap. There is a variety of financial assistance available from the SBA economic injury disaster loans to paycheck protection program loans, grants and relief from private and nonprofit organizations and small business loans from private lenders. With healthy cash flow and sound financials, you can survive the COIVID-19 crisis and stay intact.

Small Business Financing News │ Merchant Advisors | blog
Understanding the Families First Coronavirus Response Act (FFCRA)
Understanding the Families First Coronavirus Response Act (FFCRA)
Looking for funding to fund your small business? The road ahead is full of twists and turns because it does require a lot of time and research to locate the best funding program that suits your business. Due to theRead more
The Families First Coronavirus Response Act (FFCRA) is designed to help businesses and employers survive the COIVID-19 outbreak and stay intact.
MichaelGavin
Merchant Advisors
Merchant Advisors
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