Tax Credits Now Available for Employers Providing Sick Leave and Family Leave under the American Rescue Plan Act

On April 1, 2021, the American Rescue Plan Act (ARPA) went into effect.  Employers should be aware that this law contains provisions that impact workplace leave policies related to the COVID-19 pandemic and creates tax credits for employers that provide additional paid sick and family leave for employees.

Under the ARPA, qualifying employers with fewer than five hundred (500) employees are eligible for a tax credit when voluntarily providing up to ten (10) days of qualifying paid sick leave per employee, from April 1, 2021 through September 30, 2021. This means that employees who previously exhausted Emergency Paid Sick Leave (EPSL) under the Families First Coronavirus Response Act (FFCRA) may now be eligible for an additional eighty (80) hours of paid leave.

Employers should also be aware of the expanded list of reasons employees may qualify for EPSL. As of April 1, 2021, in addition to the basis for leave created by the FFCRA, employees may utilize EPSL in order to receive the COVID-19 vaccine, to recover from any side effects related to the vaccine, and while awaiting the results of a COVID-19 diagnosis or test which is required by the employer.

The ARPA also increases the employer tax credit from $10,000 to $12,000 for employers that provide employees with twelve (12), rather than ten (10), weeks of Expanded Family and Medical Leave (EFML) during the period from April 1, 2021 to September 30, 2021.  Under the ARPA, employees are permitted to utilize EFML for the same qualifying reasons as EPSL.

In order to be eligible for these tax credits, employers must ensure they are complying with new key provisions under the ARPA.  In order to receive these tax credits, employers must make the EPSL and EMFL available to all employees.  In providing this leave, employers are prohibited from discriminating against different categories of employees and cannot discriminate in favor of highly compensated employees, full-time employees, or on the basis of employment tenure.

Takeaway: In light of ARPA providing tax credits through September 2021, employers should review their time off policies, consider whether to provide employees with additional EPSL and EFML, and ensure that leave policies comply with the ARPA. 

For more information on the American Rescue Plan Act or other labor and employment matters, please contact Nicole Grzeskowiak or call us at (732) 545-4717.