Application of the Families First Coronavirus Response Act (FFCRA)
Contributor: Kathryn Freeman, NCG Business Coach & Director of Operations
The Paycheck Protection Program (PPP) might be over but the strong grip of the virus and its effect on the financial and physical health of your business and employees certainly remains. What this means for you and your team as you continue to work through the pandemic can be quite confusing. The Families First Coronavirus Response Act (FFCRA), though passed into law prior to the PPP, took a back seat because the PPP gave business owners the option of paying their team irregardless of working status.
With that money exhausted, we are now faced with the questions of what to do when people are not able to work because of the Coronavirus.
First and foremost is to recognize that under most circumstances, when an employee is impacted by the Coronavirus, this Act provides for an employee to get paid. You, the business owner, are making a cash outlay and getting “reimbursed” through credits to your quarterly tax filings. This impact can take many forms:
- Personal diagnosis
- Contact with someone who has been diagnosed
- Mandated closures from municipalities, counties or states due to quarantine
- Parents caring for their children who are no longer able to go to school or daycare
- Caring for an adult who can not care for themselves
- Sharing care for any of the above situations with another working adult (for example, being able to only work 3 days a week in order to share care for children)
Each of the scenarios above will have one of a few different pay thresholds which can be found here: Families First Coronavirus Response Act: Employer Paid Leave Requirements
What is important for you to consider is how you will determine the pay rate and then how will you document the allowable reasons for continued compensation?
Please refer to this image below from Latham & Watkins LLP in order to figure out the rate of pay for an employee who is unable to work.
Now become a devout record keeper. Each employee who is requesting or receiving this pay will have a secondary file with all of their paperwork included. Dr’s notes, copies of school closures, quarantine mandates. You will need justification for the tax credit so be sure that for every incident you are capturing the correct paperwork. Keep this separate from an employee’s standard file but organized in order to prevent a note or the like from getting misplaced.
The updated instructions for filing can be found here along with the form and instructions if your credit is greater than your tax filing for the quarter:
- Instructions for Form 941 (Rev. April 2020)
- About Form 7200, Advance Payment of Employer Credits Due to COVID-19
In short – we know that these tasks and decisions can feel complicated and overwhelming – this is new territory and as a business owner, you are doing your best to adapt to curve balls 2020 continues to throw your way. To combat this, we encourage you to continue to utilize the appropriate resources, ask questions, network with the business professionals in your network and stay on top of the details. With an ever changing landscape, it’s critical that you make this a priority to stay in the game – for the financial health of your business and wellness of your employees.